Report Centrelinks Automated Debt Raising and Recovery System April 2017

Centrelink’s automated debt
raising and recovery system

A REPORT ABOUT THE DEPARTMENT OF HUMAN
SERVICES’ ONLINE COMPLIANCE INTERVENTION
SYSTEM FOR DEBT RAISING AND RECOVERY
APRIL 2017
Report by the Acting Commonwealth Ombudsman,

Richard Glenn, under the Ombudsman Act 1976
REPORT NO. 02|2017

CONTENTS
EXECUTIVE SUMMARY ......................................................... 1

PART 1 - INTRODUCTION AND SCOPE ................................... 4
Introduction ............................................................................................................... 4
Scope of this investigation and methodology ............................................................. 4
PART 2 - WHAT IS THE ONLINE COMPLIANCE INTERVENTION

SYSTEM?............................................................................ 5
PART 3 - LESSONS LEARNED - KEY ISSUES ARISING OUT OF
OUR INVESTIGATION ........................................................... 7
Accuracy of Debts Raised by the OCI system ........................................................... 7
Ten per cent recovery fee ......................................................................................... 8
Transparency and usability of the OCI system........................................................ 9
Customers who did not receive the initial contact letter .......................................... 9
Usability of the online system ............................................................................... 11
Problems gathering employment income evidence ................................................. 12
Adequate time to respond..................................................................................... 14
Service delivery - the adequacy of DHS’ communication to customers and staff ..... 15
Communication to customers ............................................................................... 15
Directing customers online and assistance to customers to use the OCI .............. 16
Communication and training for staff .................................................................... 18
Assistance for vulnerable customers .................................................................... 19
DHS’ response to complaints and feedback ......................................................... 22
PART 4 – CONCLUSIONS AND RECOMMENDATIONS ............ 26

Recommendations regarding the ten per cent recovery fee .................................. 26
Recommendations regarding initial contact letters ................................................ 27
Recommendations to further improve clarity of messaging within the OCI system 27
Recommendations to further assist customers to gather evidence to effectively use
the OCI system..................................................................................................... 28
Recommendations to further improve service delivery .......................................... 28
Recommendations regarding vulnerable customers ............................................. 29
Future implementation of the OCI ......................................................................... 29
APPENDIX A – UNDERSTANDING THE OCI .......................... 31

The previous manual process ................................................................................. 31
The 2015 Pilot ......................................................................................................... 32
The interim process ................................................................................................. 33
The OCI process July 2016 to January 2017 ........................................................... 33
Changes to the OCI since February 2017 ............................................................... 35
APPENDIX B – THE OCI IN OPERATION .............................. 39

Accuracy of debts raised by the OCI ....................................................................... 39
Suitability and reliability of ATO data .................................................................... 39
The data matching process .................................................................................. 39
Ability of the system to accurately assess various kinds of income and exclusions41
Use of ‘averaged’ ATO income data ..................................................................... 42
Application of the ten per cent recovery fee............................................................. 43
APPENDIX C –AGENCY RESPONSES .................................. 45

APPENDIX D – LETTERS – OCI OCTOBER 2016 ................. 54
1 Initial letter to customers ............................................................................... 54
2 Reminder letter ............................................................................................. 58
3 Notice of Decision letter ................................................................................ 61
APPENDIX E – LETTERS – OCI FEBRUARY 2017 ................ 63

1 Initial letter to customers ............................................................................... 63
2 Reminder letter - first .................................................................................... 68
3 Notice of Decision Letter – debt .................................................................... 73
4 Notice of Decision Letter – debt (no customer contact) ................................. 75
APPENDIX F – SCREENSHOTS – OCI DECEMBER 2016 ...... 78

APPENDIX G – SCREENSHOTS – OCI FEBRUARY 2017 ...... 84
Commonwealth Ombudsman—Department of Human Services:
Centrelink’s automated debt raising and recovery system
EXECUTIVE SUMMARY
In July 2016 the Department of Human Services (DHS) - Centrelink launched a new
online compliance intervention (OCI) system for raising and recovering debts. The
OCI matches the earnings recorded on a customer’s Centrelink record with historical
employer-reported income data from the Australian Taxation Office (ATO). Parts of
the debt raising process previously done manually by compliance officers within DHS
are now done using this automated process. Customers are asked to confirm or
update their income using the online system. If the customer does not engage with
DHS either online or in person, or if there are gaps in the information provided by the
customer, the system will fill the gaps with a fortnightly income figure derived from
the ATO income data for the relevant employment period (‘averaged’ data).
Since the initial rollout of the OCI, the Commonwealth Ombudsman’s office has
received many complaints from people who have incurred debts under the OCI. This
report examines our concerns with the implementation of the OCI, using complaints
we investigated as case study examples.
We acknowledge the changes DHS has made to the OCI since its initial rollout. The
changes have been positive and have improved the usability and accessibility of the
system. However, we consider there are several areas where further improvements
could be made, particularly before use of the OCI is expanded. We have made
several recommendations to address these areas.
Accuracy
Administrative decisions are made on the best available information at the time of the
decision. If further information becomes available, a new decision can be made.
We examined the accuracy of debts raised under the OCI. We are satisfied the data
matching process itself is unchanged. The number of instances where no debts were
raised following contact with a customer (approximately 20 per cent) was consistent
with DHS’ previous manual debt investigation process. This figure has been
incorrectly referred to as an ‘error’ rate.
We are also satisfied that if the customer can collect their employment income
information and enter it properly into the system, or provide it to DHS to enter, the
OCI can accurately calculate the debt. After examination of the business rules
underpinning the system, we are satisfied the debts raised by the OCI are accurate,
based on the information which is available to DHS at the time the decision is made.
However, if the information available to DHS is incomplete, the debt amount may be
affected. It is important for the system design for customers to respond to information
requests from DHS so decisions are made on all available information. We have
therefore concentrated on the accessibility, usability, and transparency of the system,
including quality of service delivery and procedural fairness in this report.
Ten per cent recovery fee

Under social security law, DHS is required to apply a ten per cent recovery fee in
certain circumstances if the customer has a debt and does not have a reasonable
excuse. The debt recovery fee is not unique to the OCI and is applied to other debts
from manual compliance review processes. The OCI automated the application of the
recovery fee where there was no contact from the customer, or the customer
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responded that they did not have personal factors which affected their ability to
accurately declare their income.
This raised concerns for customers who may not have had an adequate opportunity
to provide a reasonable excuse, for example if they did not receive the initial letter, or
did not understand the connection between reasonable excuse and the recovery fee.
In response to concerns raised by our office, DHS no longer applies the fee
automatically for customers who respond to DHS. It has enhanced the OCI to make it
easier for customers who have a reasonable excuse to notify the department so they
will not be charged the fee. It now provides clearer information and further invitation
to provide a reasonable excuse in debt notification letters. We have recommended
that, in certain cases, DHS review those debts where the recovery fee was previously
applied.
Transparency and Usability

Good public administration requires a transparent and open decision making process
that clearly sets out the issues the person needs to address to challenge a decision
and the findings of fact on which the decision is based. This principle continues to
apply when decision making is automated.
Our investigation revealed DHS’ initial messaging to customers through its letters
and in the system itself, was unclear and did not include crucial information such as a
contact phone number for the DHS compliance team. Many complainants did not
realise their income would be averaged across the employment period if they did not
enter their income against each fortnight. This resulted in people with fluctuating or
intermittent income having their income averaged. In some cases this was a more
favourable outcome for the customer and in others, the debt was overstated.
We acknowledge DHS has made several changes to improve the initial contact
letters and messages within the system. We have made recommendations to further
improve these, including clearly explaining that ATO income may be averaged across
the person’s employment period and the consequences this may have for the debt
amount.
Evidence gathering
DHS has always asked customers to collect employment income information during
its compliance reviews. Under the OCI, if the person does not supply the information,
DHS will no longer use its information gathering powers to obtain it directly from
employers or other third parties.
Many complainants had problems collecting evidence about their employment

income, particularly for periods from several years ago. We have recommended in
certain circumstances, DHS should further support customers to gather employment
income evidence to maximise the accuracy of possible debts.
Service delivery and communication

Poor service delivery was a recurring theme in many complaints received by our
office. Customers had problems getting a clear explanation about the debt decision
and the reasoning behind it. As the compliance helpline number was initially
excluded from letters and was not obvious in the system, customers called general
customer service lines resulting in long wait times. They could not always get clear
information and assistance to use the online system. Service centre staff did not
always have sufficient knowledge about how the OCI system works, highlighting a
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deficiency in DHS’ communication and training to staff. In some instances, a more

thorough manual intervention by a compliance officer would have saved the
customer time and effort. We have made several recommendations for DHS to
further improve its communication to customers and staff in relation to the OCI.
The OCI will not be rolled out in a fully automated manner to customers identified as
vulnerable. DHS has told us that when the OCI is rolled out to vulnerable customers,
they will be assisted by a DHS staff member. Depending on the customer’s choice,
DHS can complete the review for them or help them use the system.
Customers who are vulnerable must be supported through alternative channels

particularly telephone services. We have recommended that DHS should expand the
group of customers included in the vulnerable cohort and provide additional
assistance and support to vulnerable people to engage with the OCI.
Planning and risk management

In our view, many of the OCI’s implementation problems could have been mitigated
through better project planning and risk management at the outset. This includes
more rigorous user testing with customers and service delivery staff, a more
incremental rollout, and better communication to staff and stakeholders. DHS’ project
planning did not ensure all relevant external stakeholders were consulted during key
planning stages and after the full rollout of the OCI. This is evidenced by the extent of
confusion and inaccuracy in public statements made by key non-government
stakeholders, journalists and individuals.
A key lesson for agencies and policy makers when proposing to rollout large scale
measures which require people to engage in a new way with new digital channels, is
for agencies to engage with stakeholders and provide resources for adequate
manual support during transition periods. We have recommended DHS undertake a
comprehensive evaluation of the OCI in its current form before it is implemented
further and any future rollout should be done incrementally.
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PART 1 - INTRODUCTION AND SCOPE

Introduction
In July 2016 the Department of Human Services (DHS) – Centrelink1
launched a new online compliance intervention (OCI) system for raising and
recovering debts.2 The OCI matches the earnings recorded on a customer’s
Centrelink record with historical pay as you go (PAYG) income3 data from the
Australian Taxation Office (ATO). Customers are asked to confirm or update their
income using the online system. If there is a discrepancy in the data match, this can
result in a debt the customer must repay. Parts of the debt raising process previously
done manually by compliance officers within DHS are now done using this automated
process.
Since the end of 2016, the Commonwealth Ombudsman’s office has received
numerous complaints from people who have incurred debts under the OCI.4 The OCI
has also generated considerable comment in the media and complaints from
community stakeholders.
Scope of this investigation and methodology

This report does not comment on the policy rationale behind the OCI process.
We accept the purpose of the OCI is to protect the integrity of government
expenditure through income support payments.
The investigation focused on debts raised by the OCI. It did not examine
DHS’ broader debt raising and recovery program or the use of mercantile agents to
recover debts. While debts raised by the OCI represent approximately eight per cent
of DHS’ total debt recovery activities,5 our observations may apply to DHS’ debt
raising and recovery more generally, particularly as the OCI is expanded to other
types of income.
Our investigation is informed by material we obtained from investigating

individual complaints, our discussions with other oversight bodies6 and meetings with
1 DHS is the agency with responsibility for administering social security, family assistance
and other support payments via its Centrelink program. For ease of understanding, the
term ‘DHS’ is mainly used in this report as it is that department’s actions and decisions
that are discussed in detail. However, where it is necessary to refer to the Centrelink
program itself, the term ‘Centrelink’ is used.
2 The OCI was introduced as part of a 2015-2016 Budget measure, ‘Strengthening the
Integrity of Welfare Payments’ and a December 2015 Mid-Year Economic Fiscal Outlook
announcement.
3 Income reported by employers
4 In the three month period from November 2016 to January 2017, the Ombudsman’s office
received 241 complaints about OCI debts (includes complaints recorded from November
2016 under a specific OCI issue string, but not complaints received in September and
October 2016). In January 2017, the Ombudsman’s office received 1563 approaches
about Centrelink matters, compared to 835 approaches in July 2016, an 87 per cent
increase in complaints.
5 Of the 1 569 911 people who were sent debt notices in the 2016 calendar year, 126 571
(approximately eight per cent) were sent debt notices under the OCI: information provided
by DHS to the Ombudsman’s office on 8 February 2017 – Debt notices prior to and due to
the OCI (Action item 03.02.2017_10).
6 Including the Office of the Australian Information Commissioner, the Inspector-General of
Taxation and the Australian National Audit Office.
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community stakeholders, including legal advocacy services and community

organisations. We met with key DHS staff onsite, had several briefings about the
OCI, and access to key documents from DHS. We acknowledge DHS’ cooperation
and assistance through the course of this investigation.
PART 2 - WHAT IS THE ONLINE COMPLIANCE

INTERVENTION SYSTEM?
2.1 DHS has conducted PAYG data matching activities with the ATO since 2004
using its information gathering powers under the Social Security Act 1991.7 The
PAYG data obtained from the ATO was matched against the total earnings declared
by Centrelink customers. Where there was a discrepancy, DHS investigated further
to decide if the customer had been overpaid and had a debt that should be
recovered.
2.2 These data matching activities identified roughly 300 000 possible
discrepancies per year. DHS would apply a risk matrix to the discrepancies to
identify the highest risk of non-compliance and would then investigate roughly 20 000
of the highest risk discrepancies per year. DHS was unable to investigate the
remaining discrepancies, due to the costs and resources involved in manually
investigating and raising debts.
2.3 Since 2010-2011 DHS has had the capacity to store its matched data, so it
holds records of discrepancies from that year onwards. In early 2015 DHS proposed8
a new online approach to compliance which would allow it to review all discrepancies
from 2010-2011.
2.4 The scale of the OCI project is significantly larger than DHS’ previous debt
raising and recovery process. DHS estimates it will undertake approximately 783 000
interventions in 2016-2017 compared to approximately 20 000 compliance
interventions per year under the previous manual process.9
2.5 The main efficiencies would be gained by:
 DHS no longer using its information gathering powers10 to request information

directly from third parties, such as employers. Under the OCI, it is now the
customer’s responsibility to provide this information
 the OCI system automatically sending letters to tell customers about the
income discrepancy
 moving much of the debt management and calculation process online
 customers entering their information directly into the OCI system.
7 DHS has advised the data matching complied with the voluntary Guidelines on Data
Matching in Australian Government Administration and was not done under the Data-
matching Program (Assistance and Tax) Act 1990. DHS began data matching activities in
1991.
8 DHS, Executive Minute to the Minister for Social Services (copy to the Minister for Human
Services), 12 February 2015 (Document 0.6)
9 Information received from DHS on 24 March 2017.
10 under sections 63, 192 and 195 Social Security (Administration) Act 1999
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2.6 DHS conducted analysis via a two stage pilot in 2015 before submitting the
measure for government approval. The findings of the pilot are discussed at
Appendix A.
2.7 Following government approval, DHS rolled out the measure in three
stages:11
 From 1 July 2015 DHS introduced an ‘interim process’. It began applying the
same approach manually that the OCI was being designed to do
automatically. DHS investigated 100 000 discrepancies during this phase.
 From 1 July 2016 DHS began rollout of the OCI, starting with a limited release
of 1000 cases into the OCI where there were income discrepancies.
 From September 201612 DHS commenced rollout of the fully automated OCI.
2.8 DHS will expand the OCI further from January 2017 and July 2017 to include
non PAYG employment data. DHS has told our office the implementation of future
compliance measures will take into account lessons learnt from the OCI.
2.9 Appendix A provides a detailed analysis of the OCI including the manual
systems and pilot programs that preceded it and the improvements made to it since
February 2017.
11 DHS, Project Management Plan, op cit (Document 0.5)

12 Information obtained from DHS site visit 19-20 January 2017. The full rollout was due to
commence on 1 July 2016 but was delayed until September 2016.
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PART 3 - LESSONS LEARNED - KEY ISSUES

ARISING OUT OF OUR INVESTIGATION
3.1 Based on the complaints made to our office about the OCI, our investigation
focused on:
 the accuracy of debts raised by the OCI, in particular those calculated using
‘averaged’13 ATO income data
 the application of the ten per cent recovery fee
 the transparency and usability of the OCI system - in particular, whether the
decision making process was clear to customers
 problems customers faced gathering evidence and effectively presenting their
case in the OCI system
 the adequacy of DHS’ assistance and communication to customers, including
those who are vulnerable (service delivery)
 the adequacy of staff training and communication to support customers using
the system
 DHS’ approach to complaints
 the adequacy of DHS’ project planning and governance mechanisms.
Accuracy of Debts Raised by the OCI system

3.2 Concerns were raised with our office about the accuracy of debts generated
under the OCI, including: the suitability and reliability of ATO data, the ability of the
system to accurately assess various types of income and exclusions, the practice of
‘averaging’ ATO data and the automatic application of a ten per cent recovery fee.
Detailed findings and analysis on these issues are set out in Appendix B.
3.3 We are satisfied that if the customer is able to collect the income information
required and enter it properly into the system, the OCI is capable of accurately
calculating the debt. The OCI has a similar proportion of discrepancies which do not
proceed to debt recovery action after the customer is contacted as the previous
manual system did, at around 20 per cent.14 This figure has been incorrectly referred
to as an ‘error’ rate.
3.4 In fact, this figure relates to the number of customers who received a letter
asking them to contact DHS about a discrepancy and who, after providing an
explanation, do not have a debt. In our view, it is entirely reasonable and appropriate
for DHS to ask customers to explain discrepancies following its data matching
13 ‘Averaging’ refers to the practice of treating income as if it was earned at a consistent rate
over a total period of employment rather than applying the precise amounts against the
fortnights in which the income was actually earned. DHS currently applies averaging
where a person accepts the PAYG data or does not enter data for all fortnights.
14 The number and proportion of discrepancies which did not proceed to action after the
individual was contacted was 17.23 per cent in 2007-2008 rising to 25.5 per cent in 2009-
2010: Australian Government, Data Matching Program Report on Progress 2007-2010
Centrelink and the Data Matching Agency
https://www.humanservices.gov.au/sites/default/files/documents/co050-200710-
1105en.pdf (January 2011) at p 14, accessed 6 March 2017.
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activities as a means of safeguarding welfare payment integrity. We would be

concerned if this figure was significantly higher under the OCI than under the
previous manual process. However, this does not appear to be the case.
3.5 DHS makes a decision about whether a debt exists based on the information
it has available within the OCI system. This relies on a person being both willing and
able to accurately verify their earnings for the review period. If the information
available to DHS is incomplete, the amount of the debt may be affected. The case
studies in the next section illustrate this.15 We asked DHS whether it had done
modelling on how many debts were likely to be over-calculated as opposed to under-
calculated. DHS advised no such modelling was done.16 In our view the absence of
modelling means DHS cannot say how many debts may be under-calculated or over-
calculated and by what margin.
3.6 The risk of over-recovering debts from social security recipients and the
potential impact this may have on this relatively vulnerable group of people, warrants
further consideration by DHS. We suggest DHS test a sizeable sample of debts
raised by the OCI. The samples should include people who did not respond to the
initial letter, as well as people who went online and people who contacted DHS via
other channels. We also suggest DHS re-evaluate where the risk for debts calculated
on incomplete information should properly lie and investigate whether there are ways
to mitigate this risk.
Ten per cent recovery fee

3.7 The Social Security Act 1991 states that a ten per cent recovery fee is applied
where an individual refuses or fails to provide information resulting in a debt, and
does not have a reasonable excuse for doing so.17 In the OCI, the automatic
application of the ten per cent recovery fee occurs when there is no contact from the
customer, or the customer specifically indicates they did not have personal factors
which affected their ability to accurately declare their income.
3.8 This raised concerns for customers who may not have had an adequate
opportunity to provide a reasonable excuse, for example if they did not receive the
initial letter, or did not understand the connection between reasonable excuse and
the recovery fee.
3.9 In the initial letters used from July 2016, customers were warned a recovery
fee may be applied, however there was no information in the letter about the
‘reasonable excuse’ exception. DHS advises that an explanation of ‘reasonable
excuse’ was added from August 2016. However, reminder letters and debt
notification letters did not include this information. A copy of these letters can be
found at Appendix D.
3.10 In response to concerns raised by our office, DHS will no longer apply the fee
automatically where there is no contact from the customer, or the customer responds
that they had personal factors which affected their ability to accurately declare their
15 For example: Ms D’s debt was reduced from $2 203.24 to $332.21, Mr S’s debt from
$3777.43 to zero, Ms H’s debt from $5,874.53 to zero, Ms G’s debt from $2914.20 to
$610.07 and Ms B’s debt from $1441.64 to $267.51.
16 Information provided by DHS to the Ombudsman’s office on 17 February 2017 –
Averaging in the OCI model (Action item 03.02.2017_04)
17 Section 1228B Social Security Act 1991
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income. DHS has taken steps to ensure that customers receive the initial letter,
including the use of registered post.
3.11 It has also made enhancements in the OCI to make it easier for customers
who have a reasonable excuse to notify the department so they will not be charged
the fee. It now provides clearer information, and a further invitation to provide a
reasonable excuse, in debt notification letters. A copy of these letters can be found at
Appendix E.
3.12 Given our concerns about DHS’ initial lack of clear communication and
information about reasonable excuse, we recommend DHS, in certain cases, review
those debts where the recovery fee was previously applied:
 customers who may not have received the initial letter or notices of debt (for
example, because they are no longer at the same address)
 customers whose initial letter did not explain that the recovery fee may not
apply if they had a reasonable excuse.18
3.13 Where a customer contacts DHS or a mercantile agent to raise a concern,

seek information, or seek a re-assessment in relation to an OCI debt which includes
a debt recovery fee (whether or not the debt has been repaid), DHS should manually
reassess whether the application of the recovery fee was appropriate, taking into
account the customer’s personal circumstances, including the existence of a
reasonable excuse.
Transparency and usability of the OCI system

3.14 Good public administration requires a transparent and open decision making
process that clearly sets out the issues the person needs to address to challenge a
decision and the findings of fact on which the decision is based. This principle
continues to apply when decision making is automated.
3.15 Our investigation revealed the letters DHS sent to customers before
20 January 2017 to alert them about the income discrepancy were unclear and
deficient in many respects. The letter did not include the 1800 telephone number for
the compliance helpline. It did not explain that a person could ask for an extension of
time or be assisted by a compliance officer if they had problems. It asked the person
to ‘confirm’ their income information, possibly giving the impression that, if the figure
was the correct annual figure, merely confirming the information would suffice. The
letter did not provide a clear explanation that applying ATO income to the person’s
record may negatively affect the amount of any debt. Copies of these letters are at
Appendix D.
Customers who did not receive the initial contact letter

3.16 Several complainants to our office stated they did not receive the initial
contact letter and reminder letters as these were sent to their last known address, not
their current address. The first time they may have heard about the debt was when
they received a demand from a debt collection agency. In some cases, complainants
did not check their myGov accounts in time to respond, due to other circumstances.
As the complaints made by Ms G and Ms B show, these customers missed their
opportunity to respond to the ATO information prior to the debt being raised. When
18 We understand that reference to ‘reasonable excuse’ was not inserted into the initial
letters until August 2016
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the person failed to go online within the timeframe, the ATO income data was
automatically applied to their record which resulted in a debt.
Ms G’s complaint
In October 2016 Ms G received an SMS and letter from DHS and an SMS from a debt
collection agency seeking payment for a debt. She told us she checked her myGov account
(set up for Medicare use only) and noticed letters dated 29 September 2016 and 24 October
2016 from Centrelink. The letters explained the earnings she reported to Centrelink in 2010-
2011 were different to her ATO income for the same period and she had a debt $2914.20. It is
possible a letter was sent to an old address, but she had moved house multiple times since
2011.
In a complaint letter Ms G wrote to DHS in December 2016, she states she received the debt
notice a few days before she gave birth to her child. She said she then had a sick newborn
baby in hospital and was only able to start dealing with the debt five weeks later. In the
meantime, it had already been referred to debt collectors.
Investigation outcome
We investigated Ms G’s complaint. DHS advised us it sent all letters to Ms G through her
myGov account, as she had nominated emails and text messages as her preferred
communication channel when she set up the account. As Ms G did not confirm or update her
employment income by the due date she had a debt. Ms G emailed DHS on 14 November
2016 seeking an explanation of the debt. A customer service officer unsuccessfully attempted
to contact her once. On 2 December 2016 DHS automatically referred Ms G’s debt to a
collection agency as she had not made a payment arrangement. After Ms G provided payslips
and had a manual assessment her debt was reduced to $610.07.
Ms B’s complaint
Ms B received newstart allowance in 2010-2011 after returning from overseas. Her payments
stopped after six weeks because she started full time employment.
In October 2016, Centrelink sent Ms B a letter advising there was a discrepancy between
ATO records and earnings she had reported to Centrelink. She was also sent a follow-up
letter advising she had a debt of $1 441.64. She told us she did not receive either letter as
they were sent to her parents’ address where she had not lived for a number of years. She
was also overseas at the time they were sent.
When Ms B returned to Australia, she contacted Centrelink and asked for a reassessment
and more time to provide payment summaries and other documents. Her request was granted
but a debt collection agency still contacted her with requests to repay the debt.
We investigated Ms B’s complaint. DHS advised that Ms B was sent an initial contact letter
and reminder letters to her last known address and a text message. As she did not confirm or
update her employment income details by the due date, she had a debt of $1 441. Ms B
asked for a reassessment of the debt. DHS advised us Ms B contacted the department on 19
December 2016 to ask for an explanation of the debt decision and to inquire about notices
she had received for three different debt amounts. On 22 December 2016 a compliance
officer manually reassessed Ms B’s debt and reduced it to $267.51. The amount included a
ten per cent recovery fee.
3.17 We acknowledge DHS is now taking additional steps to ensure people are
aware of the income discrepancy. This includes sending the initial contact letter and
first reminder letter by registered mail and sending a further reminder letter and
attempting to contact the person by phone if they do not complete the OCI.
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Usability of the online system

3.18 Our office received several complaints from people who were willing to
engage online, but had difficulty using the OCI system. Many complainants had not
realised they could enter their fortnightly income information into the system and the
importance of doing so, until they received a debt notice and contacted DHS for an
explanation. Ms D’s complaint illustrates this issue.
Ms D’s complaint
On 29 September 2016, Ms D received a letter telling her there was a discrepancy between
her earnings reported to Centrelink and her ATO income for the 2014-2015 financial year.
She had worked for three different employers on a casual basis and received varying rates of
newstart allowance during this period.
Ms D complained to our office on 5 January 2017. She told us she considered herself to be
reasonably well-educated, but found it difficult and confusing to navigate the OCI system and
was unsure of the reasons for the overpayment. Although she had payslips, a diary with her
hours and her tax return, she said she did not know how to provide information about her
actual fortnightly earnings within the OCI system. She said she found the questions in the
system too narrow, as they only asked her to confirm her employers and her group certificate
amount.
After Ms D completed the OCI process, the system advised her she owed a debt of
$2203.24.
On 3 November 2016, Ms D asked for a reassessment of the debt decision while online. She
was concerned DHS had ‘averaged’ her total income across 26 fortnights. She states she
received a text message at 2am the next morning telling her the debt had been reviewed and
the original decision had been affirmed (upheld). Ms D told us she contacted DHS Complaints
and Feedback and asked for a review.
On 9 November 2016, she handed in her payslips at a Centrelink Customer Service Centre
and they were scanned to her record. She states she was walked through the website, but the
process was still not clear to her.
On 14 November 2016 Ms D asked for another review of the decision. A Subject Matter
Expert (SME) recalculated the debt and reduced it to $332.21, based on Ms D’s actual
earnings as indicated in her payslips. On 8 December 2016 an authorised review officer
(ARO) agreed with the SME’s decision, but Ms D said she was still unclear about the reasons
why the debt had been reduced.
We investigated Ms D’s complaint. DHS told us that if Ms D had provided a breakdown of her
earnings for her periods of employment in the OCI system, this information would have been
used to calculate her entitlement. As she had accepted the ATO information while online,
DHS averaged her gross income across the full period of her employment. Once Ms D was
given the assessment outcome, there was information available to her which would have
explained the decision. DHS states it adequately explained the debt decision to Ms D. For
example, a compliance officer contacted her on 31 October 2016 to explain the debt. DHS
states it had no record of Ms D lodging a formal complaint.
3.19 In Ms D’s case, she tried to provide a breakdown of her fortnightly earnings
through the OCI system, and had payslips and other evidence available to do this,
but she still found the system difficult and confusing to navigate and the questions
too narrow. She was unable to provide more detailed information about her earnings
to avoid her income being averaged. Despite DHS’ assurances that the system
contained an explanation of how the debt was calculated, this was not apparent to
Page 11 of 110
Ms D when she tried to use it. When she complained to our office, Ms D was still
confused about how the debt arose.
3.20 There is a risk that if a person does not understand how debts are calculated,
they may not engage with the OCI system in the intended way. This occurred in Mr
S’s case below.
Mr S’s complaint
On 23 October 2016, Mr S received a letter from Centrelink telling him he owed a Newstart
Allowance debt of $3 777.43 for the 2011-2012 financial year. The debt arose due to a
discrepancy between earnings he had reported to Centrelink and income information from the
ATO for the period.
In 2011-2012, Mr S told us he worked on a casual basis as a security guard and his income
changed each fortnight depending on the shifts he worked. He stated he only claimed
newstart allowance during periods he did not work. He was concerned Centrelink incorrectly
averaged his income across his period of employment.
Mr S complained to us on 21 December 2016. He told us Centrelink had told him if he wished
to dispute the debt, he needed to provide copies of his payslips. He did not have these and
the employer he worked for was no longer in business. He reports that Centrelink told him it
would not accept copies of his bank statements as evidence.19 On 4 January 2017, after Mr S
asked for a reassessment and provided further updates to his employment income, his debt
was reduced to zero.
We investigated Mr S’s complaint. DHS told us it had averaged his income over the period of
employment, as Mr S confirmed his information online on 22 October 2016. If he had provided
a breakdown for the periods of employment, this information would have been used to assess
his entitlement.
3.21 In Mr S’s case, he did not realise a debt based on ATO income data may be
higher due to averaging. He ‘accepted’ the ATO data online, because it was the
correct annual figure. Most people receiving income support payments would not
have a detailed understanding of social security income tests or the debt calculation
process, nor should they be expected to. In our view, the OCI system does not
clearly state it uses the averaging method or explain this may be inaccurate in some
cases.
Problems gathering employment income evidence

3.22 Many complaints to our office were from people who had problems collecting
evidence about their employment to challenge the ATO data and ensure DHS had
accurate earnings information.20 Under the OCI, DHS does not use its powers to
collect information directly from employers to verify the customer’s earnings. The
effect in practice, is to place greater emphasis on the customer’s responsibility to
either accept the debt or provide further information.
3.23 In our view, this is not reasonable or fair in situations where customers have
to collect evidence from several years ago, or where the customer does not have the
capacity to obtain the evidence. Customers do not have the same information
19 An online document on Mr S’s record indicates he spoke to Centrelink on 3 November

2016 and advised he did not have supporting evidence as two of the businesses were no
longer operating. There is no direct record that he was asked to provide payslips.
20 For example, in the case studies of Ms H, Mr S, Ms C and Ms M (below)
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gathering powers as DHS. DHS has advised that under the OCI, the requirement for
documentary evidence has been reduced substantially. However, even those people
who are not formally required to provide documentary evidence will generally need to
collect income information to enter correct data into the system.
3.24 The ATO only requires individuals with simplified tax affairs to retain records
for two years.21 In the OCI context, it may be reasonable for customers to retain their
employment and payroll records for a similar period, but not for six or seven years,
particularly where they have not been forewarned about this requirement.22 Some
customers may face challenges collecting this information where their employer no
longer exists, is being unco-operative or has not retained payroll records.23
3.25 This is illustrated by Ms H’s case below.
Ms H’s complaint
On 30 September 2016, Centrelink sent Ms H a letter indicating there was a discrepancy
between her reported earnings to Centrelink and her ATO records from two different
employers for the 2010 to 2012 financial years. As Ms H did not respond to the initial letter,
the ATO income was applied to her record and she received a debt notice for $5 874.53.
The ATO information showed Ms H had worked for business M for the entire 2010-2011
financial year and the OCI system had averaged her income across the year. Ms H told our
office she stopped working for business M in November 2010 when she relocated for
personal reasons. She claimed newstart allowance after the move and told Centrelink she
had stopped working with business M at the time of her claim
On 3 November 2016 Ms H told us she initiated an online reassessment, declaring she had
stopped working for business M and uploaded bank statements and an employment contract
to her record. Ms H told us at Centrelink’s request, she tried to get payslips and a separation
certificate from her former employer, but was unsuccessful as the business had since
changed ownership multiple times.
On 23 November a compliance officer (CO) decided Ms H had worked for business M for the
entire year and completed the reassessment. DHS accepts this was done in error. On 24
November 2016, she received a letter advising that her ‘employment income review has been
completed’ and she did not ‘need to take any further action at this time.’ DHS accepts this
letter was sent in error.
On 2 December 2016, Ms H received a letter from a debt collection agency, asking her to pay
$5874.53 immediately.
On 8 December 2016, Ms H called Centrelink and advised she had provided bank statements
and other documents. At this point, she was directed back online.
Ms H spoke to a CO on 13 December 2016. She explained the only documents she could
provide as evidence were bank statements. She reported she was advised that without
payslips and a separation certificate, there was ‘nothing (she) can do’. She asked whether
Centrelink could contact her former employer directly, but was told this was her responsibility
and she should complain to the ATO about the wrong information provided by her employer.
21 Australian Taxation Office, SDR 2006/1, https://www.ato.gov.au/individuals/income-and-

deductions/in-detail/keeping-your-tax-records/, accessed 6 February 2017
22 When the OCI was initially rolled out, the DHS website stated that people only had to keep
employment records for six months. DHS has since amended its website advice to tell
people to keep their records indefinitely.
23 Other examples include: where the employer has changed payroll systems and no longer
has historical records; where the person was paid in cash; the employer cannot be
located; the employer is a former family member, partner or friend and that relationship
has broken down or involved violence.
Page 13 of 110
An online document confirms the CO advised her to get a letter of employment or final
payslips as evidence of her employment.
Ms H’s case was then referred for manual reassessment which was completed on 18 January
2017. Her debt was reduced to zero.
We investigated Ms H’s complaint. DHS acknowledged a number of errors had been made in
Ms H’s case. When a customer advises they do not work for an employer, the online process
stops and requires a CO to contact the customer and undertake a manual intervention if
required. There were several points in Ms H’s case where this should have occurred, but her
case was directed back to the online system. DHS also accepted Ms H was directed online to
provide bank statements she had already given to Centrelink on 3 November 2016. A
document on Ms H’s record shows Centrelink had already contacted business M on
6 December 2010 and confirmed Ms H had stopped working there from 26 November 2010.
3.26 We received other complaints24 where people were told by DHS staff that
payslips were the only acceptable form of evidence and bank statements would not
be accepted. In our view, DHS should have more clearly communicated to customers
the evidence they needed to provide, and what they could do if they had problems
obtaining this evidence. In particular, DHS should have given customers a clearer
and more consistent message that it would accept alternative forms of evidence,
such as bank statements, where a customer was having difficulty gathering payslips
or other evidence directly from the employer. As illustrated by Ms H’s complaint, in
some cases, DHS can consult its own records for employment information it may
have previously verified.
3.27 DHS has always accepted bank statements as reasonable evidence of

historical income where other evidence is unavailable. As customers do not have the
same information gathering powers as DHS, it is critical for DHS to give some
customers additional support and assistance to obtain this evidence when they have
made genuine and reasonable attempts and other available information is not
sufficient. The accuracy of debts relies on the customer’s ability to obtain and input
historical income information into the OCI. DHS should take into account the potential
cost to customers to obtain bank statements. We suggest that where a customer
cannot obtain the information despite genuine and reasonable attempts, DHS should
use its information gathering powers to request the information directly from the
employer or the financial institution. We suggest the Department of Social Services
should include guidelines about the process for obtaining employment income
evidence in the Guide to Social Security Law.25
Adequate time to respond

3.28 When the OCI system was first rolled out, customers had 21 days to respond
to the initial letter. They could ask for two further extensions online and additional
extensions if required by contacting DHS, but the process of asking for an extension
was unclear. Given the complexity of collecting historical employment information or
the possibility that the customer may not have received the initial letter, we consider
the 21 day timeframe was not reasonable or fair in all circumstances. We
acknowledge DHS has now extended the timeframe to respond to 28 days from
receipt of the letter, with options to ask for an extension.
24 For example, from Ms C, Mr S and Ms M (below)

25 The Guide to Social Security Law contains departmental guidelines for decision makers on
how to administer social security legislation. The Department of Social Services has
overall responsibility for the Guide.
Page 14 of 110
Service delivery - the adequacy of DHS’ communication to

customers and staff
Communication to customers
3.29 Poor service delivery was a recurring theme in many of the complaints made
to our office about the OCI system. Key problems customers experienced were:
 the compliance helpline number was excluded from letters26 and hard to find
within the OCI system itself, meaning customers called the general customer
service lines resulting in longer wait times than the compliance line
 not getting a clear explanation about the debt decision and the reasoning
behind it
 being required to go online to resolve their situation when they had already
indicated they were having difficulties
 instances where there should have been a more thorough manual
intervention by a compliance officer but the customer was still referred back
online
 difficulties getting information and assistance from service centre staff, either
on the phone or in person, or when they tried to go online to use the system
 staff not having sufficient knowledge about how the OCI system works.
3.30 The case studies of Ms M and Ms H are examples of where DHS’ service
delivery fell short. In Ms H’s case, there were several points where she was referred
back online despite explaining to DHS she had stopped working for the employer in
question and she was having difficulty getting evidence as the employer had
changed ownership. Her complaint also highlights that some DHS staff were not fully
trained in how the OCI works.27 DHS accepted there were several human errors
made in Ms H’s case. She should have had a manual intervention at an earlier stage
and should not have received letters asking her to repay a debt until her
reassessment was complete. Even when a manual assessment was done, staff did
not initially check earlier records which showed that DHS had verified her
employment six years ago.
3.31 Ms M’s case is another example where a manual intervention by a trained

compliance officer in the first instance would have been more efficient and avoided
the situation where the complainant had to contact Centrelink multiple times to
resolve her situation.
Ms M’s complaint
On 12 October 2016, Ms M received an SMS from Centrelink telling her a letter had been
sent to her old postal address and to her myGov account. She said she tried to log onto
myGov and was not able to add her Centrelink profile. She called Centrelink and was told
there was a discrepancy between her reported earnings to Centrelink and her ATO income for
the 2012-2013 financial year and she would need to resolve this matter online.
26 For letters sent before 20 January 2017 only. After this date, the initial letters included the
telephone number.
27 See also Mr J’s complaint (below)
Page 15 of 110
Ms M worked for two employers in the 2012-2013 financial year. She received newstart
allowance for two separate periods – once when she was unemployed and again when she
had to stop work due to injury. Ms M told us she believed Centrelink ‘averaged’ her
employment income fortnightly across the financial year (including during her periods of
unemployment). She also believed Centrelink had incorrectly assumed she had worked for a
third employer during the relevant period, but this issue was later resolved.
Between 24 October 2016 and 24 January 2017, Ms M had at least eight contacts with
Centrelink to resolve her issues:
 On 24 October 2016 Ms M accessed her online account and indicated she did not work
for the third employer in the relevant period. She also visited her local Centrelink office
and submitted documents.
 On 3 November 2016 a compliance officer (CO) advised Ms M they had reviewed the
documents and she would need to go back online to update the ATO information and
complete the review.
 On 11 November 2016 Ms M called Centrelink. A CO assisted her to complete the OCI,
resulting in a debt of $533.33.
 Ms M told us she tried to call Centrelink on 29 November 2016 and 6 December 2016 to
ask for a reassessment. The calls cut out or there were system issues and staff could
only collect some of the information she wished to provide.
 Ms M told us that on 9 December 2016, she spoke to a CO who told her she needed to
provide more information. Ms M reports the officer asked her to read out the information
on her payslips over the phone and manually uploaded these figures. DHS states it has
no record of this contact.
 Ms M told us that on 4 January 2017, she spoke to a CO, who advised her DHS had ‘lost’
all the information she had provided. She was walked through the OCI system and
provided detailed fortnightly income details for the relevant periods. At the end, she was
told she still owed a debt. DHS states it has no record of this contact.
 On 24 January 2017 a CO contacted Ms M to discuss her reassessment. She was told
she would need to provide her payslips from one employer. Ms M states Centrelink told
her the debt had already been reviewed twice and it would not review her circumstances
again until she provided her payslips. She has not been able to take them to her local
Centrelink office due to her demanding work schedule.
 As at 10 February 2017, Ms M had appealed the decision and was awaiting an outcome
of a review by from an Authorised Review Officer.
Ms M approached our office on 13 December 2016 and we investigated her complaint. In
relation to the calculation of the debt, DHS told us that it did not average her income across
the entire 2012-2013 financial year. However, where she did not provide additional
information, it averaged her income across the period of her employment.
DHS told us that when a customer declares they did not work for a particular employer, the
online process stops, a CO calls the customer to investigate, then resumes the online
intervention for the customer to complete. Due to an apparent discrepancy in Ms M’s
employment commencement date, DHS is waiting for her to provide further evidence
(payslips), before it completes her reassessment. DHS states it will accept documents
through the online document lodgement service, by post or in person.
Directing customers online and assistance to customers to use the OCI

3.32 In the initial stages of the OCI system rollout, many complainants told us they
were redirected back to their online accounts and were not referred to a compliance
officer in a timely manner, despite explaining they needed assistance. As DHS
Page 16 of 110
excluded the compliance helpline number from letters it sent before 20 January 2017,
this is likely to have caused more people to attend customer service centres and call
Centrelink’s general numbers where there were long wait times.28 As most people
simply required instruction in what information to collect and how to enter it into the
OCI, this would have been better handled by direct access to staff who were trained
in the OCI system. This is illustrated by Mr R’s case below.
Mr R’s complaint
Mr R had not received Centrelink payments for six months. He checked his myGov account
on 2 January 2017 after seeing news coverage about compliance letters. He had received
two letters in his Centrelink online account advising of a discrepancy between his reported
earnings to Centrelink and his ATO income for the 2011-2012 financial year. The time limit for
responding to the letters had already expired. He told us he could not understand why
Centrelink did not post the letters, given that he has not moved since 2011-2012. Centrelink
told him it had sent an SMS, but he could not recall receiving this.
Mr R worked casually for one employer in 2011-2012 and received newstart allowance during
periods when he worked fewer hours. Based on the ATO data, he told us he believed
Centrelink incorrectly assumed he had worked for two different employers, but this issue was
later resolved.
Mr R told us he called DHS Feedback and Complaints on 3 January 2017. He said the
customer service officer (CSO) recognised the issue with his employers’ names, but advised
Mr R he would need to personally verify his employer’s details using the OCI system. Mr R
stated he did not know how to do this. He asked the CSO whether he would be able to attend
a Centrelink office in person to seek assistance. He was told he could not be offered an
appointment. If he attended an office, he would be directed to use a computer unassisted.
During this call, Mr R told us he was asked to obtain payslips from his employment, but he did
not know what to do with this information if and when he was able to obtain it. He said he
asked DHS to contact his former employer directly but was told this was his responsibility.
Mr R complained to our office on 4 January 2017 and we investigated his complaint.
DHS states there was no record of Mr R contacting the department on 3 January 2017. There
is a record he contacted on 10 January 2017 for an assisted OCI. He provided verbal updates
which were applied to the system and meant he did not have a debt.
DHS told us the OCI system identified Mr R’s employer names as having the same ABN and
the employer information was not duplicated. DHS considered Mr R was adequately notified
of a potential overpayment as he received letters through his online Centrelink account and
text message reminders.
DHS states all recipients can get assistance to complete their OCI by calling the dedicated
compliance telephone line. This number is included in the help section on the OCI screens
and is now incorporated into the letters, although it was not included in the letters to Mr R,
which were from an earlier release.
3.33 In Mr R’s case, he states he was referred back online, despite making it clear
he was confused and would not know how to use the system.29 While it was true that
customer service staff were told to direct people back to the OCI in the first instance,
staff were also instructed to refer customers seeking further assistance or having
28 This has been acknowledged by DHS as a major area of complaint – see DHS Summary
of customer complaints (Document 2.7).
29 DHS says that it does not have a record of this conversation, however, based on the
information Mr R reported from that conversation, we are satisfied it took place, but was
not recorded.
Page 17 of 110
difficulties to the 1800 compliance helpline number.30 However, as demonstrated by

the case studies in this report, this message may not have been consistently
communicated to customers in all cases. Like many complaints we investigated, Mr
R also had an entry on his record stating ‘if customer contacts please refer them to
their online account’. This may have prompted staff to refer him online initially without
further consideration of his circumstances.
3.34 While we understand the business case for directing customers online to use
the OCI, this must be balanced against providing adequate support for people who
are not ‘digital ready’ (for example, those who do not have access to the internet or a
computer, are not confident or familiar in using computer systems and are not
computer literate). In our view, customers who are not ‘digital ready’ need to be
assisted through the OCI process or be offered alternative ways of responding to the
ATO information, such as by speaking with a compliance officer. It is in the interests
of both DHS and its customers, for DHS to help customers transition to a digital
system. This includes making alternative pathways (such as intervention by a
person) accessible and adequately resourced. This was highlighted in earlier reports
by this office on Centrelink’s service delivery.31
Communication and training for staff

3.35 Complaints to our office32 demonstrate that DHS did not adequately prepare
its call centre and local service centre staff to respond to OCI enquiries. In our follow-
up report on Centrelink’s service delivery we warned that ‘the transition to self-
service and online service delivery often generates further contacts with Centrelink,
as people attempt to gain the requisite online access permission, resolve online
problems, or ascertain the status of an online claim.’33
3.36 Despite this, in our view, DHS underestimated the difficulties people would
have using the OCI system and the demand for its call centre and in-person services
this would generate. We understand that while new staff were recruited and staff
diverted from other areas to support the OCI system rollout, in our view, there were
insufficient resources directed to telephone services.
3.37 In our view, DHS’ communication and training strategy for staff was not
adequate. DHS’ messaging and instructions to front line staff did not have the visual
and process detail that may have helped them better understand the customer
experience of the OCI system. The role of service delivery staff was to ‘respond to
general enquiries’, assist customers with registering their online accounts and
transfer or direct customers to the dedicated compliance telephone line.34 More
30 DHS, ‘Good Morning Smart Centres’, internal message to staff, 9 September 2016
(Document 1.5d)
31 Commonwealth Ombudsman, Investigation into Service Delivery Complaints about
Centrelink (April 2014),
http://www.ombudsman.gov.au/__data/assets/pdf_file/0021/25851/April-2014-Department-
of-Human-Services.pdf ; One year on from the Centrelink Service Delivery Report,
04/2015 (September 2015),
http://www.ombudsman.gov.au/__data/assets/pdf_file/0020/24527/September-2015-One-
year-on-from-the-Centrelink-Service-Delivery-Report.pdf
32 For example, those made by Ms M, Ms H and Ms C (see below)
33 Commonwealth Ombudsman, One year on from the Centrelink Service Delivery Report,
op cit, p 12
34 The instruction stated ‘the preferred method to undertake these interventions is via the
online channel’: ‘Good Morning Smart Centres’, DHS internal message to staff, 9
September 2016 (Document 1.5d); DHS Communication Plan, June 2016 (Document 1.5).
Page 18 of 110
detailed training plans were focused on the specialist compliance teams who were
directly assisting customers with their OCI reviews.35
3.38 The result was confusing and inconsistent messages to customers when they
tried to contact Centrelink to seek assistance, which in turn led to frustration for
customers and staff. In some instances, staff referred customers online and did not
fully assist them.36 In other instances they attempted to help but lacked sufficient
knowledge to fully advise the customer, as illustrated by Mr J’s case.
Mr J’s complaint
Mr J complained to our office after receiving a debt of $92.28, following a data match between
his employment income and ATO information for the 2011-2012 financial year.
Mr J told us he had contacted Centrelink several times but was not able get an explanation of
how the debt was calculated.
On 5 December 2016 Mr J contacted Centrelink to discuss the possible overpayment. After a
long period waiting on hold, a staff member attended to his call. After some investigation the
staff member explained there appeared to be an error with the overpayment calculation and
Mr J he did not need to take any further action. This phone call was over 47 minutes long.
Later that day, Mr J contacted the compliance helpline again to ensure that he did not need to
take any action. After a twenty minute phone call, he was not able to clarify this with the staff
member.
On 7 December 2016 Mr J received a letter asking him to repay the debt before December 22
2016. Mr J contacted the compliance team on the same day to ask why this debt was raised.
After 30 minutes the staff member suggested he go into a Centrelink service centre to obtain
his myGov login details.
Mr J told us he attended his local Centrelink service centre and tried to resolve the matter
online a number of times, but stated the system kept ‘crashing’.
DHS states the debt was removed after Mr J verbally provided his earnings for the debt
period.
Outcome
Mr J lodged a claim for Compensation for Detriment caused by Defective Administration
(CDDA) claiming compensation for the financial loss and stress he suffered as a result of the
debt being raised. DHS rejected Mr J’s CDDA claim, finding that he had not suffered a
financial detriment. Our office did not investigate Mr J’s complaint, but Mr J gave us a copy of
DHS’ CDDA decision statement where DHS acknowledged that:
‘Mr [J] was unable to receive consistent information regarding the debt or how it was
calculated…A lack of ability by various service officers to explain how the debt was arrived at
indicates a knowledge gap. His communications with the department may have been
inconsistent, frustrating and confusing but did not lead to a financial detriment.’
Assistance for vulnerable customers

3.39 This office has a particular focus on the way government policies and
programs are administered for vulnerable and/or disadvantaged people. In our
experience, people who face challenges such as remoteness, a lack of literacy, lack
of English, disability, or homelessness are more likely to have problems accessing
government services through mainstream channels. In developing new systems and
programs there is a tendency for government agencies with limited resources to
35 DHS, Compliance Learning Team Training Plan (Document 2.9)

36 For example, in the case studies of Ms H and Ms M
Page 19 of 110
focus their attention towards solutions for the greatest number. This means that
disadvantaged and vulnerable people, who require more intensive servicing, often fall
through the cracks.
3.40 DHS has told our office the fully automated system will not be rolled out to
vulnerable people.37 DHS’ policy is to send vulnerable customers a letter asking them
to call the compliance team telephone number. Depending on the customer’s choice,
DHS can complete the review for them or help them to use the system.
3.41 Vulnerable customers for OCI purposes include those with a ‘vulnerability
indicator’ (VI) on their record,38 customers in remote or very remote Australia, and
customers who are recorded as needing an interpreter.
3.42 A VI is a flag attached to the record of a jobseeker who has certain identified
vulnerabilities that may impact on their ability to comply with their mutual obligation
requirements and may put them at higher risk of non-compliance.39 These VIs are:
psychiatric problem or illness, cognitive or neurological impairment illness or injury
requiring frequent treatment, drug/alcohol dependency, homeless, recent traumatic
relationship breakdown, significant lack of literacy and language skills or a nationally
approved vulnerability.40
3.43 In our view, the use of existing VIs and geographical and language data to
identify customers for staff assisted intervention is sensible and appropriate.
However, we are concerned the existing vulnerability data may not cover all
vulnerable people for the purposes of the OCI. We also note there are limitations to
using VIs as a tool for identifying vulnerable groups:
 the VI assessment process is lengthy and complex

 as the VI is a tool designed for jobseeker compliance purposes, the
assessment of risk may focus more on the impact of vulnerability on the
person’s ability to look for and find work, which may be quite different to their
ability to engage with an online system for debt raising and recovery
 people who become vulnerable after they cease receiving income support
payments may not have a VI on their record
 staff may not recognise situations where the application of VIs should be
considered.
3.44 We recommend the group of people identified as ‘vulnerable’ should be

expanded to include:
37 There are two groups of vulnerable customers DHS has identified as requiring different
treatment under the OCI: those who are excluded from the OCI altogether (including those
who are deceased, in a bereavement period, affected by a natural disaster, legally blind or
have had an update to their circumstances) and those vulnerable people who will still fall
under the OCI but will receive a ‘staff assisted’ service offer: Documents 3.2 and 3.3-Case
selection exclusion rules and assisted compliance rules.
38 For current customers, this includes those who currently have a VI currently on their
record and for non-current customers, those who had a VI at the time the debt accrued:
Information obtained from DHS site visit, 19-20 January 2017.
39 DHS, Operational Blueprint: Vulnerability Indicators 001-10050000
40 DHS, Assisted compliance rules (Document 3.3)
Page 20 of 110
 certain customers with nominee arrangements, for example, current and

former customers with a payment nominee who is either court appointed or
an organisation
 customers with a current homelessness flag.41
3.45 In some instances, customers may become vulnerable because of the debt
raising and recovery process itself, as illustrated by Ms C’s case.
Ms C’s complaint
On 14 October 2016, Ms C received a letter advising her of a discrepancy between her
reported earnings to Centrelink and her ATO income for 2013.
In 2013, Ms C was studying and working part time and receiving Austudy and newstart
allowance. She worked casually for several different employers. Each pay period fluctuated,
but she states she reported her income as required.
Ms C logged into the OCI system, but told us she found it difficult to navigate. She said she
agreed with the total amounts that had been recorded, but believed Centrelink had averaged
her annual income across the entire financial year. She told us she did not know how to
update or correct inaccurate fortnightly information. After going through the OCI system, she
received a debt of $4386.09.
She believes Centrelink did not properly explain the debt to her. She said she was asked to
provide payslips for the relevant period, but found this difficult, as one employer was no
longer operational and documents held by another employer had been archived.
Ms C asked for a reassessment of the debt on 2 November 2016, after speaking to a
customer service officer. She later provided payslips and other evidence to support the
reassessment.
On 9 December 2016 a debt collection agency sent her a demand for immediate payment of
$4386.09. Ms C eventually agreed to pay a lump sum of $500 and ongoing payments of $80
per week.
DHS advised us a compliance officer incorrectly changed the online assessment to
‘completed’ on 12 December 2016. This resulted in Ms C receiving an incorrect letter advising
she owed $0. She attended a Centrelink office and tried to clarify, but was told the letter was
incorrect and she still owed a debt.
On 4 January 2017 Ms C wrote an email to the Minister for Social Services, where she stated
that the stress of the situation had caused her to miss shifts at work due to spending hours on
the phone to Centrelink. She reported she was unable to cope and lost her job due to stress
and inability to cope with pressure and she had been having suicidal thoughts and had to take
medication. Ms C told our office she had stopped engaging with Centrelink due to stress and
anxiety and had cried and screamed during her phone calls with Centrelink.
Investigation Outcome
We investigated Ms C’s complaint. DHS advised us that after a manual reassessment, Ms C’s
debt was reduced to $507.55 on 17 January 2017. Ms C spoke to a customer service officer
on 23 January 2017 and the officer referred her to a social worker, after noting Ms C’s email
to the Minster. Ms C later declined to go ahead with the social worker assessment and it
appears no VI was placed on her record. It also appears her email to the Minister was not
treated as a complaint.
41 A homelessness flag is separate to a VI for homelessness. The homelessness flag can

apply to all customers and payment types and only be viewed by DHS staff. The VI for
homelessness can only be applied to jobseekers and can be viewed by employment
services providers.
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3.46 In Ms C’s case, she did not have a VI on her record and was selected for an
online compliance intervention under DHS’ normal processes. However, her reported
stress and anxiety of dealing with a potential debt may have made her vulnerable. It
appears Ms C was not referred to a social worker before her matter was referred to a
debt collection agency. Her complaint raises concerns about whether DHS staff have
received adequate training and instruction on identifying and dealing with potentially
vulnerable customers in relation to the OCI system.
3.47 We have concerns that letters may not always be an effective method of
contacting vulnerable customers, for example, where the recipient is illiterate, or has
other vulnerabilities that affects their ability to understand the letter. We recommend
DHS consider making outbound calls to vulnerable customers where they do not
respond to the initial contact or reminder letters.
DHS’ response to complaints and feedback

3.48 DHS told us the number of OCI complaints it received in the initial rollout
increased between December 2016 and February 2017, but at the end of February
represented less than one per cent of OCI letters sent. At the same time, however,
complaints to our office about the OCI increased significantly.42 The complaints we
received showed some customers who had concerns about the OCI did not make
official complaints to DHS’ complaints and feedback service or have their concerns
recorded as complaints.43 In our view, the low number of complaints to DHS may be
explained by the effective reassessment process which resolved customers’ issues in
many cases, but which DHS did not record as complaints.
3.49 In January 2017, DHS analysed complaints about the OCI and identified
where improvements could be made.44 This analysis found the main complaint
themes were: confusing content in the initial letter, customers not being clear on what
action they needed to take, and customers calling the Customer Relations Unit
instead of the compliance team, causing a high volume of calls. In response to these
complaints DHS undertook further testing and made enhancements to the OCI after
the initial rollout.
3.50 This process of capturing complaint themes and using them to make
improvements demonstrate that complaints should not be viewed negatively.
Complaints about the OCI are an important window into the customer’s experience of
the system and how effectively the program is being implemented.45 DHS should
view complaints about the OCI as a free and valuable resource for informing service
improvements. In this context, ‘complaints/feedback’ is a broad concept which should
include any information about how the OCI is working, particularly from the
customer’s perspective. In our view, DHS should continue to capture information
about the OCI from internal reviews and complaints and feed this back to its business
and service delivery areas to continuously improve the system and its delivery.
42 See footnote 4
43 For example, in Ms D’s case, she told this office she asked for a review by contacting
DHS’s complaints and feedback area, but the contact itself was not recorded as an official
complaint.
44 DHS Summary of customer complaint (Document 2.7)
45 Commonwealth Ombudsman, Complaint management by government agencies: An
investigation into the management of complaints by Commonwealth and ACT government,
Report 02/2014, October 2014,
http://www.ombudsman.gov.au/__data/assets/pdf_file/0011/30017/October-2014-
Complaint-management-by-government-agencies.pdf
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Governance and risk management
3.51 DHS established a project management board and project management team
to oversee the development and implementation of the OCI.46 We are satisfied the
business rules to develop the OCI are clear, the system is auditable and is capable of
raising accurate debts if the information fed into it is correct. While we had initial
concerns about the high threshold applied to determine which cases fell out of the
OCI system for manual intervention, recent changes mean more complex cases now
also trigger manual intervention.47
3.52 We recognise that many risks are more easily identified with the benefit of
hindsight. However, in our view, there were several areas where DHS’ planning to
support the rollout of the OCI system fell short. In our view, this could have been
addressed by better project planning at the outset, including: more rigorous testing
with customers and service delivery staff prior to the rollout of the OCI system; a
slower, more incremental rollout; better communication to staff and stakeholders; and
supporting staff through an effective and incremental change management process.
3.53 In our view, the project management team failed to ensure that key external
stakeholders were effectively consulted during key planning stages. It also failed to
effectively communicate with stakeholders after the full rollout of the OCI in
September 2016, resulting in confusion and inaccuracy in public statements made by
key non-government organisation (NGO) stakeholders, journalists and individuals.
Proper communication with key NGO stakeholders, who are an effective conduit for
information to their members servicing Centrelink customers, could have ensured
that better information about the OCI was more effectively communicated. 48
3.54 The OCI project effectively shifted complex fact finding and data entry
functions from the department to the individual and its success relied on its usability.
In our view, DHS underestimated the level of customer need for assisted compliance
interventions and access to telephone channels and the extent to which some
customers would have difficulty using the system.49 To address this risk, more
thorough and intensive user testing was required. In our view, DHS should have
46 There was also an Improving Compliance Program Board and a Compliance Measures
Implementation Committee to advise the Compliance Risk Branch and relevant business
areas.
47 Information provided by DHS to the Ombudsman’s office on 24 February 2017 – Summary
advice of changes made to OCI since 1 July 2016 (Action Item Response 3.02.2017_12)
48 The risk management plan recognised the need for a strong stakeholder strategy to
mitigate the risk that insufficient communication with appropriate key stakeholders may
result in failure to realise expected program savings: DHS, Employment Income Matching
Risk Management Plan, 6 August 2015 at p 8 (Document 0.4).
49 We believe the project management team failed to recognise the significance of some of
the key differences between the interim system and the OCI, namely that:
 all customers who responded under the interim measure had spoken to a compliance
officer capable of listening to explanations, making judgements, guiding the customer
on what they needed to do and entering the relevant data provided
 the 100 000 interventions were generally ‘higher risk’ debts than the remaining
interventions used in final rollout – it follows that the final rollout may have included a
greater proportion of discrepancies that may not turn out to be debts.
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given more regard to the risks associated with usability issues. These should have
been documented50 and should have included the potential for:
 higher than expected call volumes to DHS non-compliance numbers

 higher than expected call volumes to compliance and debt recovery numbers
 customer anxiety, stress and, for some customers with unidentified
vulnerability, crisis
 loss of public confidence in the OCI system
 loss of public confidence in all DHS debts.51
3.55 These risks could also have been mitigated by a slower rollout of the project;
the development of supporting resources which were envisaged, but not initially
delivered;52 and consultation with the former Digital Transformation Office53 in the
early design and user testing phases of the project.54 We note that after DHS worked
with the now Digital Transformation Agency (DTA) in February 2017 to review and re-
design the OCI and undertook comprehensive user testing,55 this resulted in a more
user-friendly system.
3.56 DHS recognised the risk that staff would not support the change and the
media may misrepresent its key messages. It identified the need to develop a
Programme Communication Plan56 and Programme Stakeholder Engagement and
Communication Plan. However, as the press coverage reflects, the strategy was not
effectively implemented.
3.57 A key lesson for government agencies and policy makers when proposing to
rollout large scale measures which require people to engage in a new way with new
digital channels, is for agencies to engage with stakeholders and provide resources
for adequate manual support during transition periods. This may mean increasing
50 The risk management plan identifies the risk of insufficient resources. However, the list of
possible causes of this risk does not note higher than expected demands on resources
arising from usability issues. Nor does it recognise in the ‘risk consequence’ column, the
potential impact on service delivery, customer experience or reputational damage: DHS,
Risk Management Plan, op cit, p 11 (Document 0.4).
51 While OCI debts comprise only eight per cent of all DHS debts, our office has received
high volumes of complaints from people who incorrectly believe they have an OCI debt. A
similar level of confusion has been found in the media.
52 DHS’s Communication Plan (op cit at p 4) refers to the development of tutorials and
pictorials (Document 1.5).
53 The former Digital Transformation Office (DTO) was responsible for digital service delivery
across government and to assist agencies with their ‘digital transformations’:
https://www.malcolmturnbull.com.au/policy-faqs/faqs-the-digital-transformation-office
accessed 10 March 2017. In October 2016 the Government announced the new Digital
Transformation Agency to replace the DTO with an expanded role to guide, oversee and
drive the Government’s digital transformation agenda:
http://ministers.dpmc.gov.au/taylor/2016/new-digital-agency-establishes-agenda accessed
10 March 2017.
54 DHS advised our office it did not consult with the DTO in the development and testing of
the OCI – information obtained from DHS site visit, 19-20 January 2017.
55 Information provided by DHS to the Ombudsman’s office on 17 February 2017 – Customer
testing narrative (Action Item Response 17.02.2017_4). The redesign team undertook user
testing with 26 customers and analysed feedback from help desk staff.
56 DHS, Risk Management Plan-Strengthening the Integrity of Welfare Payments, p 3 of 30
(Document 1.0)
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resources for staffing, or ensuring that timeframes for rolling out the new program are
realistic relative to existing resources.
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PART 4 – CONCLUSIONS AND RECOMMENDATIONS

4.1 The OCI is a complex automated system that was rolled out on a large scale
within a relatively short timeframe. There will inevitably be problems with the rollout of
a system of this scale. In our view the risks could have been mitigated through better
planning and risk management arrangements at the outset that involved customers
and other external stakeholders in the design and testing phases.
4.2 Key considerations in developing automated decision making systems are

whether the system is consistent with administrative law values of lawfulness,
fairness, rationality, openness/transparency and efficiency.57 Customers need to
understand how the system works, have the opportunity to present their information
in a considered way and be supported in the transition from a manual to an
automated system. Clear and comprehensive information to customers and staff is
important. As discussed in this report, DHS did not clearly communicate aspects of
the system to its customers and staff which led to confusion and misunderstanding.
4.3 In February 2017, DHS made changes to the OCI process, partly in response
to feedback from this office and complaints made to DHS itself. The changes have
been positive and have improved the usability and accessibility of the system. The
changes were developed after more comprehensive user testing involving customers
and after seeking input from the Digital Transformation Agency. Full details of the
February 2017 changes are set out in Appendix A.
4.4 In our view, these changes go some way to addressing the problems
identified in this report that occurred in the initial rollout of the OCI. However, we
consider there are several areas where further improvements could be made and we
have made a number of recommendations to address these. We consider it is
important for DHS to address these issues before the OCI is rolled out further,
particularly to vulnerable customers.
Recommendations regarding the ten per cent recovery fee

4.5 We welcome DHS’ advice that it has now removed the automatic application
of the ten per cent recovery fee for customers who engage with DHS.58 We
recommend DHS review those debts already raised by the OCI where the recovery
fee has been automatically applied.
Recommendation 1 – Ten per cent recovery fee

We recommend that in certain circumstances DHS should reassess those
debts already raised by the OCI where the recovery fee was applied
automatically, including, where a customer contacts DHS or a mercantile agent
to raise a concern, seek information, or seek a re-assessment in relation to an
OCI debt which includes a debt recovery fee (whether or not the debt has been
repaid). DHS should manually reassess whether the application of the recovery
57 Australian Government, Better Practice Guide on Automated Assistance in Administrative

Decision-Making (February 2007)
http://www.ombudsman.gov.au/__data/assets/pdf_file/0032/29399/Automated-Assistance-
in-Administrative-Decision-Making.pdf accessed 30 January 2017
58 DHS briefing to the Ombudsman’s office, 17 February 2017
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fee was appropriate, taking into account the customer’s personal

circumstances, including the existence of a reasonable excuse.
Recommendations regarding initial contact letters

4.6 We acknowledge the improvements DHS has made to its initial contact letters
since 20 January 2017. The current letters now contain the dedicated 1800
compliance helpline number, although this appears on the second page of the letter
and is not obvious to the reader. The letter asks the person to either ‘confirm or
update’ their information which clarifies they can make changes. It tells the person
they may need payslips or bank statements to check their employment information.
Customers no longer need a myGov account to access the system. Copies of letters
used from February 2017 are at Appendix E.
4.7 In our view, DHS could make further improvements to improve the clarity of
the initial letters and give customers better information so they understand the
information and can properly respond to it.
Recommendation 2 – Initial contact letters

The initial contact letters to customers should:
(a) place the compliance helpline number on the first page
(b) mention the possibility of a debt earlier
(c) clearly explain the concept of averaging. In particular, letters should
explain that if the customer does not go online or if they accept the ATO
data, their income will be averaged over periods for which income has
not been verified and debts based on averaged ATO income may be less
accurate, especially if the customer’s income was fluctuating or
intermittent.
(d) advise people they can ask for an extension of time online or by calling
the compliance helpline number.
Recommendations to further improve clarity of messaging within the OCI

system
4.8 The February 2017 changes which include improvements to the help
functions, explanations and overall usability of the OCI go some way to addressing
our concerns about usability of the system. However, in our view, the messaging
within the system itself should give a clearer explanation of what it means if the total
ATO income is ‘averaged’ across the employment period. It should explain this will
occur if the customer does not provide fortnightly earnings information, if the
customer does not respond, or provides incomplete information. Copies of the OCI
screenshots prior to February 2017 are at Appendix F. Copies of the OCI screen
shots after February 2017 are at Appendix G.
Recommendation 3 – Messaging within the OCI

DHS should include a message within the OCI system to clarify that if the
customer does not enter their income information, their ATO income will be
averaged evenly across the relevant period and this may result in a debt. The
message should advise that debts based on averaged ATO income may be less
Page 27 of 110
accurate than debts based on actual income, especially if the customer’s

income was fluctuating or intermittent.
Recommendations to further assist customers to gather evidence to effectively

use the OCI system
4.9 We have made the following recommendations to further assist customers
gather evidence to effectively use the OCI system.
Recommendation 4 – Obtaining employment income evidence

(a) DHS should take into account the potential cost to some customers of
obtaining bank statements. Where this cost would cause financial
hardship to the person, DHS should use its powers to request the
evidence directly from the financial institution.
(b) Where a person contacts DHS for assistance in relation to the OCI, DHS
should use its information gathering powers to assist the person to
obtain income information from a third party, such as a former employer
or bank, if:
• despite genuine and reasonable attempts to do so, the person has been
unable to obtain income information; or
• it would be unreasonable, in the circumstances of their case, to expect
them to obtain such information
(c) Where customers advise they had stopped working for a particular
employer, DHS should consult its own records to confirm if that
information had previously been verified with the employer and/or if the
customer had notified DHS at the time.
(d) The Department of Social Services should include clear guidelines
about the process for obtaining employment income evidence in the
Guide to Social Security Law.
Recommendations to further improve service delivery

4.10 We accept DHS has now implemented a number of changes to improve its
service delivery to customers in relation to the OCI system. Customers can more
easily get assistance by contacting the dedicated 1800 compliance helpline number.
This number is now prominently displayed within the OCI system, although less
prominently in the letters to customers. Customers can also ask for a reassessment
or internal review by calling the compliance helpline. More cases will be assessed
manually if they are complex or if the person disputes any aspect of the assessment.
In addition to these changes, we consider DHS should implement the following
measures to further improve its service delivery in relation to the OCI system.
Recommendation 5 – Communication to customers and staff

DHS should:
(a) ensure its 1800 compliance helpline number continues to be adequately
resourced
(b) produce comprehensive publicly available information for customers on
how to use the OCI system, which includes the compliance helpline
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telephone number and how to obtain relevant employment income

evidence. This information may include video on demand (VOD)
resources and fact sheets
(c) modify the standard message in customer records to refer them to their
online account, to reflect that customers can be referred for assistance
if required
(d) continue to provide comprehensive training as required to specialist
compliance staff and regular messaging to all service delivery staff on
the OCI system, in particular, ensuring customers are directed to, and
assisted by, the specialist compliance staff
(e) systematically capture and record information obtained from complaints
and internal reviews and use this information to continuously improve
the OCI system from the customer’s perspective.
Recommendations regarding vulnerable customers

4.11 We recognise that customers identified as vulnerable will be ‘staff-assisted’.
We consider that before the OCI is rolled out further, DHS should consider expanding
the group of customers identified for a staff assisted intervention and provide them
with additional assistance and support.
Recommendation 6 – Expansion of customers who are offered a staff assisted

intervention
Before the OCI system is rolled out further, the following groups should be
included in the current vulnerable (staff assisted) cohort for OCI purposes:
a) current and former customers with a payment nominee who is either
court appointed or an organisation
b) customers with a current homelessness flag on their record who are not
already captured under the Vulnerability Indicators
Recommendation 7 – Assistance to vulnerable customers

DHS should provide additional assistance and support to vulnerable people to
engage with the OCI system. In particular:
(a) DHS should consider making outbound calls to vulnerable customers
where they do not respond to the initial or reminder letters, to explain
what is required and start the staff assisted service offer.
(b) DHS should consult with relevant stakeholders about the difficulties
vulnerable groups may face when engaging with the OCI.
Future implementation of the OCI

4.12 In our view, it is critical DHS monitors and evaluates the effectiveness of
recent and future changes to the OCI. This should include capturing information
about the OCI obtained from complaints, feedback and internal reviews and using
this information to inform continuous improvements to the system and DHS’ service
delivery. It also includes evaluating how to mitigate the risk of over-recovery of debts.
Page 29 of 110
Recommendation 8 – Future implementation of the OCI

Before further expansion of the OCI, DHS should:
(a) undertake a comprehensive evaluation of the OCI in its current form
(b) give further consideration as to how to mitigate the risk of possible
over-recovery of debts.
Further rollout of the OCI should be done incrementally.
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APPENDIX A – UNDERSTANDING THE OCI

Many of the processes for investigating, raising and recovering debts
discussed in this report have been in place for a long time.59 While some of these
manual processes have been automated within the OCI, debts raised by the OCI
account for eight per cent of all debt notices issued to customers.60 Manual
processes continue to operate for debts raised outside of the OCI.
This appendix provides detailed analysis of the treatment of PAYG income

discrepancies under the OCI as well as the manual debt raising systems and pilot
programs that preceded it, and the improvements made to the OCI since February
2017.
The previous manual process

Under the manual process, when a debt was identified for investigation it was
allocated to a DHS compliance officer who would contact the customer, if necessary,
to ask for information. Where it appeared an overpayment may exist, the customer
was asked to provide payslips or other supporting documentation to verify their
income. This would be done by sending a legal notice under the Social Security
(Administration) Act 1999 (the Administration Act), that required the customer to
produce the information.61
If the information requested was not forthcoming or did not adequately

address the request, the compliance officer wrote to the customer’s employer using
DHS’ information gathering powers62 to obtain payroll records showing fortnightly
income information.63 The compliance officer entered the fortnightly earnings
information into a DHS debt calculation system64 to work out whether there had been
an overpayment. If an overpayment had occurred, the compliance officer raised a
debt and could apply a ten per cent recovery fee if they were satisfied the customer
had refused or failed to provide information about their income or had recklessly or
knowingly failed to declare their income without reasonable excuse.65
If fortnightly earnings information still could not be obtained, DHS guidelines

permitted compliance officers to apportion ATO annual earnings over the debt period,
59 For example manual processes for, data matching, investigations, application of 10 per
cent recovery fee and debt recovery.
60 See footnote 5
61 For current social security recipients, the notice was sent out under s 63 or section 80 of
the Administration Act, and the consequence for non-compliance was suspension or
cancellation of payment. For former social security recipients, the notice was sent out
under the department’s broader information gathering powers under Part 5, Division 1
sections 192-197 of the Administration Act, the penalty being up to 12 months
imprisonment (unless the customer was unable to comply or had a reasonable excuse).
62 Part 5, Division 1 sections 192-197, Administration Act
63 If employer information was unavailable, DHS would seek information from other third
parties, as appropriate.
64 This system is known as Multical.
65 Section 1228B Social Security Act 1991.Until recently, DHS had automatically applied a
10 per cent recovery fee to all debts unless the customer has a vulnerability indicator, a
special circumstances exemption, is part of an exempt cohort (age and carer pensioners)
or indicates that there were personal reasons affecting their ability to declare their income.
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but only ‘if every possible means of obtaining the actual income information has been
attempted.’66
Once the debt was raised, the customer was sent an account payable notice
and the debt recovery processes would commence.
The 2015 Pilot

DHS conducted a two stage pilot in 201567 to inform the design of the online
compliance system.68 One of its aims69 was to test options for pre-calculating any
debt (prior to customer contact) and post-calculating any debt (once the customer
was contacted). The results of the pilot included:
 69.6 per cent of interventions resulted in a debt 70

 the average debt value was $2546.21
 40 per cent of customers contacted DHS after receiving the initial letter
notifying them of a potential discrepancy
 50 per cent of customers that contacted DHS decided to proceed using the
ATO data match
 irrespective of whether the customer had contacted DHS beforehand, ten per
cent of customers contacted to discuss the outcome
 appeals were below normal appeal rates71
66 DHS Operational Blueprint 107-02040020 - Acceptable documents for verifying income

when investigating debts
67 The pilot involved two phases. Phase one involved 1 000 customers selected from a
random sample of customers who had debts for the 2010-2011 year. The pilot took place
in two sites. Interventions undertaken in Site 1 were ‘pre-calculated’ which meant the
earnings apportionment was undertaken prior to initiation and stored for staff to access
during the customer call. Interventions in Site 2 were “post-calculation’ which meant
earnings were apportioned and the debt calculated during the call. Phase two involved
1600 customers from a random sample of risk categories across the three years 2010-
2011 to 2012-2013. In that pilot, a ‘contact centre model’ was tested whereby debts were
calculated by contact centre staff during the customer call, and debts identified as needing
a ‘multical’ calculation were referred to a processing team for action: Pilot PAYG
Interventions op cit, pp 4-5 (Document 1.8).
68 DHS, Strengthening the Integrity of the Welfare System: Pilot PAYG Interventions: Manual
Process Final Report, 25 August 2015 (Document 1.8)
69 It also aimed to test the new behavioural insights initiation letter and customer acceptance
of the data provided by the ATO: Pilot PAYG Interventions, op cit, p 4 (Document 1.8).
70 This figure was 76.8 per cent for targeted risk categories.
71 There were a total of 45 appeals lodged, of which nine were withdrawn following further
explanation. This represented a two per cent appeal rate. At the time of the report eight
cases had been finalised by Administrative Review Officers, with five being varied and two
set aside due to new information being supplied. Most related to slight miscalculations,
although in two cases the debt period was modified due to information already coded or
previously supplied prior to the intervention: Pilot PAYG Interventions, op cit, p 13
(Document 1.8).
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The interim process

DHS commenced an interim rollout of a new compliance approach from
1 July 2015. DHS identified 100 000 discrepancy cases for manual assessment.
However, this process differed from the previous process in several ways.
First, it placed greater emphasis on the obligation for customers to provide

DHS with current and accurate information about their circumstances, including
changes to earnings. DHS staff would no longer seek this information from
employers for the purposes of calculating a debt.
Second, DHS no longer sent legal notices requiring people to provide

information.72 Rather, DHS sent a letter which:
 alerted the customer to the possible discrepancy

 asked the customer to call DHS on the 1800 number for the compliance team
 warned that if the customer did not contact DHS within 21 days it would use
the ATO information to make a decision.
Third, if there was no response from the customer, or the response was
incomplete, the compliance officer would manually calculate the debt but would do so
by averaging the ATO income data.
The OCI process July 2016 to January 2017

In July 2016 DHS launched the OCI. The initial group of customers selected
for the ‘online compliance intervention’ included those who received income support
payments in the 2010 to 2014 financial years, many of whom were no longer
Centrelink customers. The OCI began with a limited rollout to approximately 1000
customers from July 2016 and progressed to a wider rollout in September 2016.
Copies of OCI letters and screenshots from December 2016 are attached at
Appendices D and F.
The initial letter
Once records with discrepancies were released into the OCI it sent a letter to
the customer’s myGov account (and an SMS if the customer was registered for SMS
notifications) or a letter to their last-known address73 telling them about the
discrepancy.
The letter74 attached details of the ATO information obtained by DHS and
gave customers 21 days to respond to the letter by going online to myGov to
‘confirm’ their employment income information in the online compliance system.75 If
72 Previously, notices were sent under Part 5, Division 1 sections 192-197 of the
Administration Act
73 Letters have mostly been used for those who do not have a registered Centrelink online
account linked to their myGov account. DHS has advised letters were sent via the
preferred communication channel the customer had selected.
74 For customers identified by DHS as ‘vulnerable’, a separate letter was developed which
asked them to call Centrelink and provided a telephone number. However, the OCI was
not rolled out to vulnerable customers, except for a small number of people in the pilot and
in early July 2016.
75 DHS, Chronology of PAYG letters (Document 1.6, Attachment A)
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the customer did not have a myGov account, they would need to set one up before
they could view the information.76 Until 20 January 2017, the letter did not provide
telephone contact details.77
The letter warned if the customer did not go online to confirm their income
DHS ‘will update [their] details using the enclosed employment income information’.
If the customer did not go online
If the customer did not go online within 14 days, the OCI sent a reminder
letter.
If the customer still did not go online by the due date in the reminder letter,
the OCI apportioned the ATO earnings information evenly over the period the
employer told the ATO the customer worked for them, to calculate any debt. Where a
debt was calculated, the OCI generated a debt notice (an account payable notice)
which was sent to the customer. At this stage, the normal debt recovery processes
commenced.
If the customer went online
When the customer went into the OCI they worked through several screens
displaying the ATO income data and could correct that information or supply more
detailed information, including details of their employer, pay amounts and pay
periods. The customer had to declare the information was correct and was warned of
the risk of criminal penalties for providing false information.
The OCI assessed whether to accept the updated information and/or any
documents provided by the customer. Where the OCI did not accept the evidence, it
generated an ‘error’.78 A compliance officer reviewed the ‘error’ to decide if it required
a manual assessment. If the error was fixed, the assessment returned to the OCI. If
the error could not be fixed, a compliance officer manually assessed the evidence to
decide the outcome.
Appendix B analyses the debt calculation process used by the OCI, including
its ability to accurately assess various kinds of income and exclusions, and its use of
‘averaged’ ATO income.
The debt notice
Once the assessment was completed, the OCI automatically generated a

letter which notified the debt amount and any recovery fee. Customers were advised
to ‘go online to get details of this decision or to provide more information’.
76 Once a customer sets up a myGov account the customer can link their account to
Centrelink to access their Centrelink online account or they can continue to access their
account via the DHS website.
77 The inclusion of the compliance team number was recommended by this office during a
briefing about the OCI from DHS on 6 January 2017.
78 DHS business rules developed by a data analyst identify interventions that may have an
error: DHS, OCI: A Customer Journey flowchart, provided to our office on 20 January
2017.
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Once the OCI calculated the customer’s debt, if any, an automatically

generated account payable notice was sent to the customer. The debt notice
included the 1800 number for the debt recovery unit and the compliance team.
Reassessments, reviews and complaints
The OCI was designed so that if more information was received at any time
(either online, by phone or in person) debts could be reassessed in light of the new
information. There were built-in tolerances which defined what information would be
automatically accepted by DHS as reasonable, and what would require further
verification (for example, payslips and employer information). These are known as
‘reassessments’. There was no limit to the number of reassessments that could occur
when new information was entered.
A customer could seek internal review via a link in the OCI, or via other
traditional methods (for example, in writing, by phone, and in person). Processes for
seeking external review were unchanged.
Changes to the OCI since February 2017

In January 2017 this office met with DHS on three occasions and provided
feedback about the OCI. On 1 February 2017 DHS and the Digital Transformation
Agency conducted a heuristic79 review of the OCI using feedback from customers
and help desk staff to redesign, test and review proposed changes to improve the
OCI and letters.80
From February 2017 DHS made changes to the original system. Copies of
OCI letters and screenshots from February 2017 are attached at Appendices E and
F.
Logging on
Customers no longer need a myGov account to access the OCI system. They
can log onto the system using a unique confirmation code and their Customer
Reference Number81 which is provided to them in the initial letter.82
Letters
DHS made changes to the letters it sends customers. The first changes were
put in place on 20 January 2017. Further changes followed in February 2017.
The initial letter now includes the 1800 number for the compliance team. In
the 20 January letter this was in bold, halfway down the first page. In the February
2017 version, it is in regular font on the back page.83 The new letter clearly states the
79 A review using trial and error or by rules that are only loosely defined – Oxford Dictionary
accessed 21 February 2017 https://en.oxforddictionaries.com/definition/heuristic
81 DHS PowerPoint presentation v2.0 Employment Income Confirmation, 5 February 2017 pp
2-11 at Appendix G; Employment Income Confirmation: Letter Process Flowchart,
provided to the Ombudsman’s office on 17 February 2017 (Action Item Response
17.02.2017_6)
82 Once they log into the system they are asked to verify their identity using their passport,
drivers licence or Medicare card.
83 Letters deployed on 20 January 2017. These letters included, in bold writing, the 1800
number to call if people required further assistance. There was also more clarity that:
Page 35 of 110
letter is not a debt letter and provides a security code to enable the person to log
onto the system directly, without needing to use myGov.
DHS has also taken steps about non-receipt of mail for people who have
moved address since they last received Centrelink payments. Initial letters and the
first reminder letter will now be sent by registered mail.84 If a customer has not
completed the OCI after receiving a second reminder letter, DHS will attempt to
contact the person by phone.85 DHS has obtained authorisation to enable it to access
more recent address data where it exists within other programs it administers.86
Where authorised, DHS will also access data from third parties, such as the
Australian Electoral Commission. DHS has told us it will now not refer OCI debts to a
debt collector where the person has not responded until it is satisfied ‘the person has
received the notice but is ignoring it’.87
Time to respond
The timeframe to respond to the initial letter has increased. Originally it was
21 days from the date of the letter. The timeframe is now 28 days from the date the
customer receives the letter.
The option to seek an extension of time is now signposted in the OCI which
lets people know what information they may need to collect.88
Increased manual interventions
The OCI is now directed to people who have relatively simple employment
circumstances. People with more complex circumstances will now fall out for manual
intervention.
Manual intervention by a compliance officer now occurs when:
 the customer disputes any aspect of the assessment (for example where they
indicate they did not work for the employer, the period of employment is
changed or they do not accept the gross estimated amount)
 they answer ‘yes’ or ‘unsure’ to the questions about whether they received
allowances for out of pocket expenses, income from superannuation,
compensation, income protection, Community Development Program projects
or government Paid Parental Leave
 they do not have access to payslips or bank statements, or are requested to
provide documented evidence 89
Communication within the OCI
 both employment income and employment dates should be checked, confirmed or

changed by the customer
 not responding may result in a debt.
84 Information provided by DHS to the Ombudsman’s office on 24 February 2017 – Changes
to the OCI since 1 July 2016 (Action Item Response 3.02.2017_12)
86 That is, a Public Interest Certificate to enable the use of address data.
88 DHS PowerPoint v2.0, op cit, p 12; DHS briefing to the Ombudsman’s office, 17 February
2017 and Changes to OCI since 1 July 2016, op cit (Action Item Response 3.02.2017_12)
89 DHS PowerPoint v2.0, op cit, p 22
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Overall, communication within the OCI is improved by greater clarity. In

particular, there are more prominent help functions and explanations within the
system.90 For example, on the ‘Check your Income Details Breakdown’ page, a help
icon link is now located in the text of the main instruction:
“If you are unsure what pay amounts to enter into the payment periods displayed, click ?
for help.”91
The OCI will now accept bank statements
To address concerns about people being unable to obtain their payslips to

enter their income information into the OCI, DHS has introduced a bank statement
net to gross income calculator function.
Customers will first be asked if they have payslips as these are the most
reliable information source. If they do, they are not presented with the bank
statement option.
If the person answers ‘no’ to the payslip question they will be asked if they
have bank statements. Customers can now enter their net income as shown on their
bank statements and the system will reverse calculate their gross rate. The system
clearly explains that it adds the amount of tax the ATO says they paid to the net
amount. It also makes clear that the conversion of net information produces a ‘total
estimated gross amount’.
Revising information and the provisional reassessment
Previously a customer could re-enter the system at any time (even after the
debt is raised, or during or after internal or external appeal processes) to enter new
information.
The revised OCI gives a person more opportunity to move back and forth
within the system before finally accepting the provisional assessment. The
provisional assessment screen states:
‘The provisional result indicates we over paid you by $______. We will send you notification
of this by letter. If you do not accept this result, you can update your employment details
again or call us on 1800 086 400.’ 92
It also warns the customer that if the result is not accepted within 14 days
ATO data will be applied and may result in a debt.
Unlike the original system, once a provisional reassessment has been

accepted the customer cannot re-enter the system. Rather, they will need to contact
DHS to have the decision formally assessed or reviewed.
Debt recovery and the review process
90 DHS briefing to the Ombudsman’s office, 17 February 2017 and DHS Table of help text
provided to the Ombudsman’s office on 6 March 2017 (Action Item Response
17.02.2017_2)
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DHS has told this office it will pause recovery action while a matter is under
internal review, unless the customer requests to continue paying back the debt. DHS
also advised it will not commence debt recovery action and is taking debts back from
debt collectors, until it is satisfied that a person is aware of the debt and their appeal
rights.
The ten per cent debt recovery fee is no longer applied automatically
DHS no longer applies the fee automatically where there is no contact from
the customer, or the customer responds that they had personal factors which
affected their ability to accurately declare their income. Enhancements within the OCI
make it easier for customers who have a reasonable excuse to notify the department
so they will not be charged the fee.
DHS now provides clearer information, and a further invitation to provide a

reasonable excuse, in debt notification letters. A copy of this letter is at Appendix E.
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APPENDIX B – THE OCI IN OPERATION

Accuracy of debts raised by the OCI
2.10 Good public administration requires that administrative decision making is

consistent with the administrative law values of lawfulness, fairness, rationality,
transparency and efficiency.93
2.11 Concerns raised with this office about the accuracy of debts raised by the OCI
included:
 the suitability and reliability of ATO income data

 the ability of the system to accurately assess various types of income and
exclusions
 the ‘averaging’ of ATO income data.
2.12 In this section we have analysed the ATO data match process, the ability of
the system to accurately calculate debts, the use of averaged ATO income data and
the application of the ten per cent recovery fee to debts. We are satisfied the ATO’s
role and the information it provides in the data match process has not changed.
However, under the OCI the way DHS investigates ATO data discrepancies has
changed.
Suitability and reliability of ATO data
The data matching process

2.13 Each financial year, DHS puts together a data file94 of all customers who
received income support payments during that financial year. This data file includes
identity information such as names, date of birth and historical addresses. It does not
include the customer’s tax file number (TFN) because use of the TFN is restricted to
data matching under the Data Matching (Assistance and Tax) Act 1990 (the Data
Matching Act).95
2.14 The ATO applies confidence ratings to its income data. DHS advised that it
uses data which scores in the top three ATO confidence ratings.96
2.15 Once the DHS data file is received by the ATO, the ATO uses tax file
numbers to extract information it holds about that individual (for example, name,
address and date of birth). The ATO provides DHS with:
 income information obtained from the payee (customer)

 income information obtained from the payer (employer)
93 Administrative Review Council, Automated Assistance in Administrative Decision Making,

Report to the Attorney-General, Report no. 46 (November 2004), p 3
94 Information obtained from DHS site visit 19 January 2017.
95 In effect, to use TFNs would limit the data DHS could match against. To enable data
match of a wider set of information, DHS uses its broader information gathering powers
under the Social Security Act, rather than the Data Matching Act.
96 This is the ATO’s rating of the reliability and accuracy of that data.
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2.16 DHS told us it sends approximately 80 million identities to the ATO and
receives approximately six million matches back from the ATO.
What DHS does with the data
2.17 Using the matched data from the ATO, DHS begins a process of validation
and data cleansing. This process includes cleansing (for example, making sure dates
are in the correct format) and ‘fuzzy logic’ which is a set of rules for ignoring certain
discrepancies based on the probability that they are no or low risk. For example, if an
employer name is the same except for the omission of ‘Pty Ltd’, fuzzy logic rules
apply to disregard the discrepancy.
2.18 A series of further selection rules are then applied which assess the risk of
overpayment. Factors include, but are not limited to, time spent on social security
payments during the year, and the size of the discrepancy. There is a minimum
discrepancy threshold for selection.97
2.19 DHS advised that as a general rule, roughly 300 000 discrepancies are
identified as likely overpayments and each carry a risk weighting which indicates the
likelihood of a debt outcome.98
2.20 DHS has confirmed that, prior to being released into the OCI, historical data
match information is ‘refreshed’, that is, the data match process is re-run (for
example, in case customers had lodged amended tax returns in the intervening years
that can impact the historical data).
2.21 In the past, approximately 20 000 of the highest risk files underwent manual
investigation annually. Under the ‘Strengthening the Integrity of Welfare Payments’
measure, from 1 July 2015 a further 100 000 of the next highest risk files were
released for investigation under the interim measure. From 1 July 2016, all remaining
files were released into the OCI.
2.22 DHS told us, and we are satisfied, that the ATO data being used, along with
the data matching, fuzzy logic and selection processes, has not changed since the
introduction of the OCI. What has changed is how the selected income discrepancies
are investigated by DHS.
Investigation of discrepancies
2.23 Aside from averaging the ATO income data, which is discussed separately
below, concerns raised with this office have related to situations where debts have
been calculated:
 because the OCI was unable to recognise that income had been correctly
declared, but the employer name held by the ATO was different to the name
the customer gave to DHS (for example, ‘MacDonalds’ had been declared to
Centrelink as ‘Maccas’ or where a customer uses a trading name instead of a
company name)
97 While our office is aware of the dollar figure for this threshold, we do not consider it
appropriate to publish, for business integrity reasons.
98
Risk is assessed using a combination of the time a person has been in receipt of a
Centrelink payment for a financial year and the income discrepancy between the person’s
total earnings declared to DHS, compared to the total earnings declared to the ATO for a
financial year: DHS Case Selection Business Parameters (Document 3.2).
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 dates of employment provided by the ATO were incorrect.
2.24 Prior to 1 July 2016, selected discrepancy files were investigated by a DHS
compliance officer who, by conducting an ABN search or after speaking with the
customer, could ascertain that income had previously been properly declared under a
different employer name or that the dates provided by the employer to the ATO were
incorrect. According to the 2007-2010 Data-Matching Program Report on Progress99,
the number and proportion of discrepancies which did not proceed to debt recovery
action after the customer was contacted ranged from 17.23 per cent in 2007 to 25.5
per cent in 2010.
2.25 The concerns about incorrect ATO data for periods of employment depends
on the quality of data provided by the employer to the ATO and highlights the
different purpose of the ATO data. For example, a student may work for an employer
for two weeks during each holiday break, which the employer may declare as one
period beginning on the first day of employment and ending on the last day they were
employed (despite the long gaps in employment). The failure to take into account
gaps in employment impacts the accuracy of debt calculations by DHS. We
understand DHS is discussing with the ATO what steps it could take to improve the
quality of employer reported data.100 At the same time, changes to the OCI now make
it clearer to customers that they need to check their dates of employment.
2.26 DHS has conceded that, if restrictions on the use of tax file numbers were
removed, it could improve the quality of data-matching. However, only around 20
mismatched identities occur each year.
Ability of the system to accurately assess various kinds of income and

exclusions
2.27 There has been public concern about the ability of the OCI to accurately
calculate the various kinds of income a person receives (including leave payments,
allowances, lump sums, termination payments and so on) along with income test
concessions and incentives (for example working credits and student income bank).
2.28 In our view the business rules in the OCI that support the debt calculation are
comprehensive and accurately capture the legislative and policy requirements. The
OCI appears to have the capacity to accurately calculate various types of non-
standard income including leave payments, termination payments, fringe benefits,
allowances and reimbursements, and apply relevant exclusions and credits, such as
free areas, income banks and working credits.
2.29 However, the calculation relies on the customer accurately entering the
various types of income into the OCI for each previously unverified fortnight of
income during the debt period.
2.30 The OCI is also designed so that any entitlement fortnights for which income
has been previously verified (for example, if the person provided payslips from time
to time during the year), will be excluded from the debt calculation.
99 Based on the last available DHS report on data matching under the Data Matching Act.
100 Information obtained via DHS site visit 19 January 2017
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Use of ‘averaged’ ATO income data

2.31 Under the Social Security Act, a fortnightly income test is applied to determine
a daily rate of payment, generally paid in fortnightly instalments. A person’s
entitlement in any given fortnight will therefore be assessed on the income they
earned, derived or received that fortnight. This is different to the tax system (including
family payments) which is concerned with assessing annual income. ATO data
normally provides an aggregate annual employment income figure and does not
provide the detail required to accurately assess fortnightly social security
entitlements.
2.32 DHS has always had a process for averaging ATO data to calculate debts.101
The process is set out in its operational guidelines102 however it was limited to last
resort situations: ‘If every possible means of obtaining the actual income information
has been attempted, it is possible to use any evidence available to raise a debt
including an annual figure.’ The guideline also identifies the risks involved in
averaging income data and shows DHS was aware that averaging ATO earnings
may result in incorrect debts:
‘Some of the difficulties:

- If a customer reports fortnightly and has under declared, there may be no evidence to
support a finding of false or misleading information for any given fortnight
- If employment is for a part of a year only, averaging over 12 months will not result in a
correct result if the customer should have received a full rate at other times of the year
- If income varied greatly during the year, the result may be incorrect
Actual period(s) worked should be obtained so that averaging only occurs for periods
worked.
The raising and recovery of debts must satisfy legislative requirements. Evidence is
required to support the claim that a legally recoverable debt exists’. 103
2.33 We asked DHS whether it had done modelling on how many debts were likely
to be over-calculated as opposed to under-calculated. DHS advised no such
modelling was done.104 In our view the risk of over-recovering debts from social
security recipients should be the subject of more thorough research and analysis.
2.34 Averaging in the OCI occurs when:

 the customer does not respond to DHS’ request to go online or contact DHS
by the due date
 the customer’s response is incomplete – for example, if the person entered
the information accounting for some, but not all of the income received over
the debt period. In this case, the OCI will average the balance over the
remainder of the period/s
 the customer’s response is outside certain tolerances as to what is
reasonable (in such cases, the OCI requires a compliance officer to consider
101 DHS told this office on 3 February 2017 that it ‘uses the concept of averaging income in
the absence of detailed information and has been using this methodology since the early
1980’s, both in manual and OCI systems’.
102 DHS Operational Blueprint 107.02040020 Acceptable documents for verifying income
when investigating debts

103 DHS Operational Blueprint 107-02040020
104 DHS briefing to Ombudsman’s office, 17 February 2017
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the matter and a person may be required to provide payslips. If the response
remains unverified and is still considered to be unreasonable, the ATO data
will be preferred and used to raise the debt via the OCI).
Application of the ten per cent recovery fee

2.35 Automated decision making is authorised by section 6A of the Social Security
(Administration) Act 1999 (the Administration Act).105
2.36 According to the Administrative Review Council’s Automated Assistance in

Administrative Decision Making Better Practice Guide106, a key question in the design
of automated decision making systems in administrative law is whether the system is
designed ‘so that the decision-maker is not fettered in the exercise of any discretion
or judgement they may have’.
2.37 The Social Security Act states that a ten per cent penalty is added to a debt if
the debt arose wholly or partly because the person had refused or failed to provide
information about their income or had knowingly or recklessly provided incorrect
information. However, it also states ‘this section does not apply if the Secretary is
satisfied that the person had a reasonable excuse for refusing or failing to provide the
information’.107
2.38 The business rules that underpin the application of the reasonable excuse
discretion are beneficial if the person engages with the system and indicates there
were personal circumstances that impacted their ability to declare their income. This
is particularly so in the redesigned system. This means that for people who do
engage with the system, the penalty will be manually applied, if at all.
2.39 The penalty will continue to be automatically applied where the department
has sought reasonable excuse information, but none has been forthcoming from the
customer. If a debt recovery fee is applied, the person will receive a debt notification
letter which now provides them with a further opportunity to provide a reasonable
excuse and have the fee removed.
2.40 The question of whether these procedural fairness safeguards coupled with
the beneficial application of the reasonable excuse provisions are effective in
addressing the risk of fettering of the discretion can only be answered by the courts.
2.41 Our observation is that DHS’ approach cannot be fair and effective if the
department is not effective in its communication to customers about the availability,
meaning and importance of reasonable excuse, and the ways of notifying the excuse
to the department.
2.42 In the version of the OCI rolled out from 1 July 2016, DHS considered
‘reasonable excuse’ by asking ‘were there any personal factors that affected your
ability to correctly declare your income during the above period/s?’. If a person
answered ‘yes’ to this question, the penalty fee was not automatically applied by the
105 Our office has seen a copy of the delegation in the DHS, Online Compliance Intervention
Detailed Requirements Document, p 11 of 176.
106 Australian Government, Automated Assistance in Administrative Decision-Making: Better
Practice Guide (February 2007)

http://www.ombudsman.gov.au/__data/assets/pdf_file/0032/29399/Automated-Assistance-
in-Administrative-Decision-Making.pdf, accessed 31 January 2017
107 Section 1228B, Social Security Act 1991
Page 43 of 110
OCI. If the person answered ‘no’ (or if no answer was provided by the date the debt
was raised) the recovery fee was applied automatically.
2.43 In our view, the messaging in the OCI lacked clarity and the ‘personal
circumstances’ question may have been insufficient to elicit the necessary
reasonable excuse information. In some situations, a person may have answered ‘no’
to the personal circumstances question in situations where a human decision maker,
able to review the person’s Centrelink record108 ask relevant questions and consider
all the relevant circumstances of the case, may have decided the penalty fee should
not apply, or the discretion not to apply the fee should be exercised. Examples
include where:
 income was declared but was not coded into the system because of
administrative error
 a customer provided information about fluctuating income on their claim form,
but due to administrative error was not placed on fortnightly reporting
arrangements
 a customer did not go online or contact DHS (for example, because they
thought if the ATO figure was correct they did not need to, or because of
vulnerability)
 a customer still believed at the time they answered the question they had
declared accurately (note that the question was asked before the customer
was notified of the debt) and so did not turn their mind to the question
properly
 a customer did not understand what ‘personal circumstances’ meant, or
lacked insight into their circumstances
 other situations where information has been provided prior to the
intervention.109
108 Such as records of contemporaneous discussions with the department including contact
with Social Work Officers, Indigenous Customer Service Officers or other specialist
officers
109 In its evaluation of the 2015 pilot, DHS had finalised eight of 27 cases referred to the ARO
network. In two of those cases debts were set aside due to information already coded or
previously supplied prior to the intervention: Pilot PAYG Interventions, op cit (Document
1.8).
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APPENDIX C –AGENCY RESPONSES
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APPENDIX D – LETTERS – OCI OCTOBER 2016

1 Initial letter to customers
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2 Reminder letter
Page 58 of 110
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3 Notice of Decision letter
Page 61 of 110
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APPENDIX E – LETTERS – OCI FEBRUARY 2017

1 Initial letter to customers
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2 Reminder letter - first
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3 Notice of Decision Letter – debt
Page 73 of 110
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4 Notice of Decision Letter – debt (no customer contact)
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APPENDIX F – SCREENSHOTS – OCI DECEMBER

2016
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APPENDIX G – SCREENSHOTS – OCI FEBRUARY

2017
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Report Centrelinks Automated Debt Raising and Recovery System April 2017

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Report Centrelinks Automated Debt Raising and Recovery System April 2017

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Centrelink’s automated debt

raising and recovery system

Report by the Acting Commonwealth Ombudsman,

REPORT NO. 02|2017

EXECUTIVE SUMMARY ......................................................... 1

PART 2 - WHAT IS THE ONLINE COMPLIANCE INTERVENTION

PART 4 – CONCLUSIONS AND RECOMMENDATIONS ............ 26

APPENDIX A – UNDERSTANDING THE OCI .......................... 31

APPENDIX B – THE OCI IN OPERATION .............................. 39

APPENDIX C –AGENCY RESPONSES .................................. 45

APPENDIX E – LETTERS – OCI FEBRUARY 2017 ................ 63

APPENDIX F – SCREENSHOTS – OCI DECEMBER 2016 ...... 78

Ten per cent recovery fee

Transparency and Usability

Many complainants had problems collecting evidence about their employment

Service delivery and communication

deficiency in DHS’ communication and training to staff. In some instances, a more

Customers who are vulnerable must be supported through alternative channels

Planning and risk management

PART 1 - INTRODUCTION AND SCOPE

Scope of this investigation and methodology

Our investigation is informed by material we obtained from investigating

community stakeholders, including legal advocacy services and community

PART 2 - WHAT IS THE ONLINE COMPLIANCE

2.5 The main efficiencies would be gained by:

 DHS no longer using its information gathering powers10 to request information

11 DHS, Project Management Plan, op cit (Document 0.5)

PART 3 - LESSONS LEARNED - KEY ISSUES

Accuracy of Debts Raised by the OCI system

activities as a means of safeguarding welfare payment integrity. We would be

Ten per cent recovery fee

3.13 Where a customer contacts DHS or a mercantile agent to raise a concern,

Transparency and usability of the OCI system

Customers who did not receive the initial contact letter

Usability of the online system

Problems gathering employment income evidence

19 An online document on Mr S’s record indicates he spoke to Centrelink on 3 November

3.25 This is illustrated by Ms H’s case below.

21 Australian Taxation Office, SDR 2006/1, https://www.ato.gov.au/individuals/income-and-

3.27 DHS has always accepted bank statements as reasonable evidence of

Adequate time to respond

24 For example, from Ms C, Mr S and Ms M (below)

Service delivery - the adequacy of DHS’ communication to

3.31 Ms M’s case is another example where a manual intervention by a trained

Directing customers online and assistance to customers to use the OCI

difficulties to the 1800 compliance helpline number.30 However, as demonstrated by

Communication and training for staff

Assistance for vulnerable customers

35 DHS, Compliance Learning Team Training Plan (Document 2.9)

 the VI assessment process is lengthy and complex

3.44 We recommend the group of people identified as ‘vulnerable’ should be

 certain customers with nominee arrangements, for example, current and

41 A homelessness flag is separate to a VI for homelessness. The homelessness flag can

DHS’ response to complaints and feedback

Governance and risk management

 higher than expected call volumes to DHS non-compliance numbers

PART 4 – CONCLUSIONS AND RECOMMENDATIONS

4.2 Key considerations in developing automated decision making systems are

Recommendations regarding the ten per cent recovery fee

Recommendation 1 – Ten per cent recovery fee

57 Australian Government, Better Practice Guide on Automated Assistance in Administrative

fee was appropriate, taking into account the customer’s personal

Recommendations regarding initial contact letters